HOFV
Hall of Fame Resort & Entertainment CO
NASDAQ
10-Q: Hall of Fame Resort & Entertainment Company Faces Financial Headwinds Amidst Lease Default and Ongoing Losses
Sentiment:
Quarterly Report
13 November 2024 5:18 PM
Hall of Fame Resort & Entertainment Company reports a net loss of $34.5 million for the nine months ended September 30, 2024, and faces a critical lease default, raising concerns about its ability to continue as a going concern.
Worse than expected
The company's net loss of $34.5 million for the nine months ended September 30, 2024, is worse than expected.
The company's default on the waterpark ground lease and the risk of default on other loan agreements are worse than expected.
The company's precarious cash position and the substantial doubt about its ability to continue as a going concern are worse than expected.
Delay expected
The company's waterpark project has been delayed due to the termination of the ground lease.
Capital raise
The company is seeking additional funding through debt, construction lending, and equity financing.
The company's ability to raise capital on acceptable terms or at all is uncertain.
Summary
- Hall of Fame Resort & Entertainment Company (HOFRE) reported a net loss of $34.5 million for the nine months ended September 30, 2024.
- The company's accumulated deficit reached $252 million as of September 30, 2024.
- HOFRE is currently in default on a waterpark ground lease, which has led to a notice of termination and the requirement to surrender the premises.
- The company is also in default or at risk of default under loan agreements totaling approximately $81 million.
- The company's cash position is precarious, with $2.6 million in unrestricted cash and $4.9 million in restricted cash as of September 30, 2024.
- Operating activities used $7.1 million in cash during the nine months ended September 30, 2024.
- The company needs to raise additional capital to fund its development plans and working capital.
- There is no assurance that HOFRE will be able to raise capital on acceptable terms or at all.
- The company's ability to continue as a going concern is in substantial doubt due to these financial challenges.
Sentiment
Score: 2
Explanation: The document paints a very negative picture of the company's financial health, with significant losses, defaults, and substantial doubt about its ability to continue as a going concern. The termination of the waterpark lease is a major setback, and the company's reliance on additional capital raises further underscores its precarious situation.
Positives
- The company received a $9.8 million grant from the State of Ohio, providing some financial support.
- Sponsorship revenues increased by 5.7% for the nine months ended September 30, 2024, compared to the same period in 2023.
- Operating expenses decreased by 38.4% for the nine months ended September 30, 2024, compared to the same period in 2023.
Negatives
- The company's net loss for the nine months ended September 30, 2024, was $34.5 million.
- The company's accumulated deficit reached $252 million as of September 30, 2024.
- The company is in default on its waterpark ground lease, leading to a termination notice.
- The company is in default or at risk of default under loan agreements totaling approximately $81 million.
- The company's cash position is precarious, with only $2.6 million in unrestricted cash.
- Event, rents, restaurant and other revenues decreased by 11.9% for the nine months ended September 30, 2024, compared to the same period in 2023.
- Hotel revenues decreased by 8.9% for the nine months ended September 30, 2024, compared to the same period in 2023.
- The company's ability to continue as a going concern is in substantial doubt.
Risks
- The company's ability to raise additional capital is uncertain.
- The company may be required to reduce the scope of its planned development.
- The company may not be able to continue to fund or may have to significantly curtail its ongoing operations.
- The termination of the waterpark ground lease could have a material adverse effect on the company's financial condition.
- The company is in default or at risk of default under certain loan agreements.
- The company has a material weakness in its internal control over financial reporting.
- The company's common stock may be delisted from Nasdaq if it fails to comply with continued listing standards.
Future Outlook
The company's future is uncertain, with substantial doubt about its ability to continue as a going concern. The company needs to raise additional capital to fund its development plans and working capital. There is no assurance that the company will be able to raise capital on acceptable terms or at all.
Management Comments
- Management acknowledges the material weakness in internal control over financial reporting.
- Management states that the company is seeking additional funding through debt, construction lending, and equity financing.
- Management believes that the company was in compliance with all of its notes payable covenants as of September 30, 2024.
Industry Context
The company operates in the resort and entertainment industry, which is subject to economic fluctuations and consumer spending patterns. The company's reliance on sponsorships and events makes it vulnerable to changes in corporate spending and event attendance. The company's financial difficulties highlight the challenges of developing large-scale entertainment destinations.
Comparison to Industry Standards
- Compared to other resort and entertainment companies, HOFRE's financial performance is significantly weaker, with substantial losses and a precarious cash position.
- Companies like Cedar Fair (FUN) and Six Flags (SIX) have demonstrated more stable financial performance and stronger cash flows.
- HOFRE's reliance on debt financing and its current default on a key lease agreement are not typical of well-established players in the industry.
- The company's inability to generate sufficient revenue to cover its operating costs is a significant deviation from industry norms.
- The termination of the waterpark ground lease is a major setback, as it was a key component of the company's development plans.
Stakeholder Impact
- Shareholders face significant risk of losing their investment due to the company's financial difficulties.
- Employees may be affected by potential layoffs or restructuring.
- Customers may experience disruptions in services or the cancellation of events.
- Suppliers and creditors face the risk of non-payment.
- The local community may be impacted by the potential failure of the Hall of Fame Village project.
Next Steps
- The company needs to secure additional financing to continue operations.
- The company needs to address the default on the waterpark ground lease.
- The company needs to remediate the material weakness in its internal control over financial reporting.
- The company needs to evaluate the non-binding proposal from IRG.
Related Party Transactions
- The company has related-party transactions with IRG and PFHOF.
- Stuart Lichter, a director of the company, is also President of IRGLLC and MLF and a director of CHCL.
- The company entered into a Professional Services Agreement with IRG in conjunction with expanded services requested of an executive.
Key Dates
- September 16, 2019: Date of the original Merger Agreement.
- November 6, 2019: First amendment to the Merger Agreement.
- December 30, 2019: Date of the original City of Canton Loan agreement.
- December 30, 2019: Date of the original New Market/SCF loan agreement.
- March 10, 2020: Second amendment to the Merger Agreement.
- June 19, 2020: Date of the Secured Cognovit Promissory Note payable to JKP Financial, LLC.
- June 30, 2020: Assignment date of the Secured Cognovit Promissory Note payable to JKP Financial, LLC.
- July 1, 2020: Date of the business combination with HOF Village, LLC and effective date of the 2020 Omnibus Incentive Plan.
- October 7, 2020: Date of the management agreement with Shulas Steak Houses, LLLP.
- December 1, 2020: Amendment date of the Secured Cognovit Promissory Note payable to JKP Financial, LLC.
- June 2, 2021: Date of the 2021 Annual Meeting where the 2020 Omnibus Incentive Plan was amended.
- September 30, 2021: Date of the Equity Distribution Agreement with Wedbush Securities Inc. and Maxim Group LLC.
- December 15, 2021: Date of the Loan Agreement with ErieBank.
- March 1, 2022: Date of the first amended and restated promissory note payable to IRG, LLC and JKP Financial, LLC.
- April 8, 2022: Effective date of the Global License Agreement with PFHOF.
- April 27, 2022: Date of the promissory note payable to Midwest Lender Fund, LLC (MLF).
- June 16, 2022: Date of the original business loan agreement with Stark Community Foundation, Inc.
- June 16, 2022: Date of the promissory note issued by the Company to CHCL.
- July 14, 2022: Date of the Online Market Access Agreement with Instabet, Inc. (betr).
- August 31, 2022: Date of the original Stark County Infrastructure Loan.
- September 15, 2022: Date of the original City of Canton Infrastructure Loan.
- September 27, 2022: Date of the Sale-Leaseback transaction with Twain GL XXXVI, LLC.
- November 3, 2022: Date of the Hotel Construction Loan Commitment Letter with IRGInc.
- November 7, 2022: Date of the Sale-Leaseback transaction with Oak Street Real Estate Capital, LLC and the IRG Letter Agreement.
- December 27, 2022: Date of the Open-End Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing with HOFV Stadium.
- January 12, 2023: Date of the issuance of Series A Preferred Stock to ADC LCR Hall of Fame Manager II, LLC.
- January 23, 2023: Date of the issuance of additional Series A Preferred Stock to ADC LCR Hall of Fame Manager II, LLC.
- January 24, 2023: Date the board of directors adopted the Hall of Fame Resort & Entertainment Company 2023 Inducement Plan.
- May 2, 2023: Date of the issuance of additional Series A Preferred Stock to ADC LCR Hall of Fame Manager II, LLC.
- June 7, 2023: Date the stockholders approved an amendment to the 2020 Omnibus Incentive Plan and the IRG Letter Agreement.
- September 13, 2023: Date of the Amendment to Global License Agreement with PFHOF.
- October 10, 2023: Date the Company reduced the amount of shares of its Common Stock that could be issued and sold pursuant to its at-the-market program.
- November 1, 2023: Date of the lease agreement with Touchdown Work Place, LLC.
- January 11, 2024: Date of the sale of 80% interest in the ForeverLawn Sports Complex.
- January 17, 2024: Date of the amendment to the CH Capital Term Loan Agreement.
- January 30, 2024: Date the Company provided notice of its intention to extend the maturity date of the IRG Debt Instruments.
- February 1, 2024: Date of the amendment to the CH Capital Term Loan Agreement.
- February 23, 2024: Date of the First Amendment to Lease with Oak Street.
- February 28, 2024: Date of the amendment to the CH Capital Term Loan Agreement.
- February 29, 2024: Date of the Second Amendment to the ground lease agreement for the waterpark with Oak Street.
- March 15, 2024: Date ErieBank agreed to release certain of its pledged restricted cash.
- March 26, 2024: Date of the First Amendment to Lease Agreement with Touchdown Work Place, LLC.
- March 31, 2024: Effective date of the omnibus extension of certain debt instruments.
- April 7, 2024: Date of the formal omnibus extension of certain debt instruments.
- April 8, 2024: Date of the Amendment No. 2 to the Equity Distribution Agreement.
- May 10, 2024: Date of the third amendment to the lease agreement with Oak Street.
- May 20, 2024: Date of the amendment to the Stark County Infrastructure Loan.
- May 30, 2024: Date the Company received a grant of $500,000 from SCF.
- June 5, 2024: Date of the amendment to the City of Canton Loan and City of Canton Infrastructure Loan.
- June 8, 2024: Date the Company provided notice to Shulas of its intent to terminate the management agreement.
- June 11, 2024: Date of the loan agreement with the Stark Community Foundation, Inc.
- June 17, 2024: Date of the Customer Contract for EME Express Services Equipment Program with Constellation NewEnergy, Inc.
- June 25, 2024: Date of the amendment to the New Market/SCF loan agreement and the First Amendment to Business Loan Agreement with Stark Community Foundation, Inc.
- June 28, 2024: Date the Company was awarded a $9.8 million grant from the State of Ohio.
- July 1, 2024: Date the Company received approximately $9.9 million from Constellations Energy Made Easy program.
- August 9, 2024: Date the Company received the $9.8 million grant from the State of Ohio.
- August 18, 2024: Date the Company took over management of the restaurant.
- September 11, 2024: Date of the Amended and Restated Global License Agreement with PFHOF.
- September 14, 2024: Date the registration statement on Form S-3 expired.
- September 25, 2024: Effective date of the Forbearance Agreement.
- September 27, 2024: Date IRG delivered a preliminary non-binding proposal to the Companys Board of Directors.
- October 10, 2024: Date ErieBank released an additional $943,864 of the held back portion of the loan proceeds.
- October 22, 2024: Date the Company opened the restaurant under a new brand, Gridiron Gastropub.
- October 26, 2024: Date the Company received a notice of termination due to event of default on its waterpark ground lease.
- November 11, 2024: Date the Company and CH Capital signed a term sheet for interim financing.
- November 13, 2024: Date of the filing of the 10Q report.
Keywords
Hall of Fame Resort & Entertainment Company, HOFRE, financial results, lease default, going concern, waterpark, debt, capital raise, operating loss, sponsorship revenue
HOFV
Hall of Fame Resort & Entertainment CO
NASDAQ
Sector: Communication Services
Filings with Classifications
Capital raise
25 June 2025 4:05 PM
Delisting Notice and Debt Amendment
- The company increased its 'Facility Amount' under the Note and Security Agreement by $2,000,000, from $12,000,000 to $14,000,000.
- This additional funding is provided by CH Capital Lending, LLC, an affiliate of a company director, Stuart Lichter.
Delay expected
25 June 2025 4:05 PM
Delisting Notice and Debt Amendment
- The company failed to hold its annual meeting of shareholders on or prior to June 30, 2025, which is a requirement by Nasdaq Listing Rule 5620(a).
Worse than expected
25 June 2025 4:05 PM
Delisting Notice and Debt Amendment
- The company is facing imminent delisting from Nasdaq, a significant negative event for a publicly traded company.
- The delisting is due to a failure to meet a fundamental corporate governance requirement (holding an annual shareholder meeting).
- While new funding was secured, it is from a related party, which can be viewed less favorably than arms-length financing, especially in the context of delisting.
Capital raise
29 May 2025 8:05 PM
Current Report
- The company increased its existing credit facility by $2,000,000, raising the total available amount to $12,000,000.
- This capital is provided by CH Capital Lending, LLC, an affiliate of a company director, Stuart Lichter.
- The funds are designated for general corporate purposes.
Delay expected
19 May 2025 4:05 PM
8-K Filing
- The maturity date was extended from March 31, 2025, to September 30, 2025, indicating a delay in the company's ability to meet its original repayment schedule.
Worse than expected
13 May 2025 4:06 PM
Quarterly Report
- The company's net loss increased slightly compared to the same period last year.
- Total revenue decreased significantly due to lower sponsorship and event revenues.
- Management expresses substantial doubt about the company's ability to continue as a going concern.
Capital raise
13 May 2025 4:06 PM
Quarterly Report
- The company states that it will need to raise additional financing to accomplish its development plan and fund its working capital.
- 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.
Capital raise
12 May 2025 11:32 PM
Merger Announcement
- The Buyer Parties' obligation to consummate the Merger is conditioned on receiving 'Parent Acquisition Financing' in an aggregate amount of not less than $20 million.
- The Buyer Parties' obligation to consummate the Merger is additionally conditioned on receiving 'additional project level financing' in an aggregate amount not less than $125 million.
Capital raise
8 May 2025 9:23 PM
Merger Announcement
- The merger is contingent on the Investor obtaining $20 million in financing.
- The merger is also conditioned on securing $125 million in additional project-level financing.
Worse than expected
8 May 2025 9:23 PM
Merger Announcement
- The acquisition price of $0.90 per share is significantly lower than the company's previous trading price, indicating a less favorable outcome for shareholders compared to previous expectations.
Capital raise
8 May 2025 5:21 PM
Merger Announcement
- The transaction is contingent on the Investor obtaining $20 million in financing.
- The transaction is also conditioned on prior or concurrent consummation of additional project level financing in an aggregate amount not less than $125 million.
Worse than expected
8 May 2025 5:21 PM
Merger Announcement
- The company is being acquired for $0.90 per share, which may be considered worse than expected for investors who anticipated higher returns or continued growth as a public entity.
Worse than expected
16 April 2025 4:05 PM
8-K Filing
- The company received a deficiency letter from Nasdaq due to its stock price falling below the minimum bid price requirement, indicating a negative development.
Delay expected
4 April 2025 8:05 PM
Current Report (8-K)
- The maturity dates of debt instruments and convertible notes have been delayed.
Delay expected
3 April 2025 11:43 AM
SEC Form 4
- The maturity dates of several convertible debt instruments were extended from March 31, 2025, to either September 30, 2025, or December 31, 2025.
Worse than expected
26 March 2025 5:00 PM
Annual Report
- The company's revenue decreased from 2023 to 2024.
- The company's net loss decreased from 2023 to 2024.
- The company's cash position is deficient and it requires additional capital to fund operations and debt service.
Delay expected
26 March 2025 5:00 PM
Annual Report
- The Company postponed its 2024 Annual Meeting of Stockholders.
Capital raise
26 March 2025 5:00 PM
Annual Report
- The company's cash position is deficient, and it requires additional capital to fund operations and debt service.
- The company is seeking to obtain additional funding through debt, construction lending, and equity financing.
Delay expected
16 January 2025 5:13 PM
8-K Filing
- The company failed to hold its annual meeting within 12 months of its fiscal year end, resulting in a delay and a delisting notice from Nasdaq.
Worse than expected
16 January 2025 5:13 PM
8-K Filing
- The company received a delisting notice from Nasdaq for failing to hold its annual meeting within the required timeframe, which is a negative development.
Worse than expected
20 November 2024 4:05 PM
Current Report
- The high interest rate of 12%, potentially rising to 17%, suggests the company is in a weaker financial position and had to accept unfavorable terms.
- The extensive security interest granted to the lender indicates a lack of financial flexibility and a higher risk profile.
Delay expected
13 November 2024 5:18 PM
Quarterly Report
- The company's waterpark project has been delayed due to the termination of the ground lease.
Capital raise
13 November 2024 5:18 PM
Quarterly Report
- The company is seeking additional funding through debt, construction lending, and equity financing.
- The company's ability to raise capital on acceptable terms or at all is uncertain.
Worse than expected
13 November 2024 5:18 PM
Quarterly Report
- The company's net loss of $34.5 million for the nine months ended September 30, 2024, is worse than expected.
- The company's default on the waterpark ground lease and the risk of default on other loan agreements are worse than expected.
- The company's precarious cash position and the substantial doubt about its ability to continue as a going concern are worse than expected.
Capital raise
31 October 2024 4:05 PM
Current Report
- The company is in discussions with IRG Canton Village Member, LLC regarding a non-binding proposal to take the company private, which could involve a capital raise or restructuring.
- The company's current financial situation suggests that a capital raise or restructuring is likely necessary to address its liquidity issues.
Worse than expected
31 October 2024 4:05 PM
Current Report
- The termination of the waterpark ground lease due to a payment default is a significantly worse outcome than expected.
- The company's inability to meet its financial obligations and the potential loss of key assets are also worse than expected.
Delay expected
23 October 2024 4:05 PM
Current Report
- The 2024 Annual Meeting of Stockholders has been postponed from its original date of November 21, 2024.
Better than expected
17 September 2024 4:05 PM
Material Definitive Agreement
- The removal of the annual license fee and the waiver of the $600,000 payment for 2024 are better than the previous agreement.
Worse than expected
19 August 2024 5:04 PM
Shareholder Letter
- Second quarter revenue was below the prior year, indicating worse than expected performance.
Delay expected
19 August 2024 5:04 PM
Shareholder Letter
- The funding process for the Gameday Bay Waterpark and Hilton Tapestry Hotel has taken longer than originally anticipated due to a restrictive lending environment and multiple stakeholders.
Worse than expected
15 August 2024 4:05 PM
Quarterly Report
- The company's revenue decreased by 23% year-over-year, indicating worse than expected performance.
- The net loss attributable to shareholders increased to $15.8 million from $13.6 million in the prior year, indicating worse than expected performance.
Worse than expected
13 August 2024 4:05 PM
Quarterly Report
- The company's revenue decreased compared to the same period last year.
- The company's net loss increased compared to the same period last year.
- The company's hotel revenues decreased compared to the same period last year.
Capital raise
13 August 2024 4:05 PM
Quarterly Report
- The company expects that it will need to raise additional financing to accomplish its development plan and fund its working capital.
- The company is seeking to obtain additional funding through debt, construction lending, and equity financing.
- The company may have to raise additional capital through the equity market, which could result in substantial dilution to existing stockholders.
Capital raise
14 May 2024 4:06 PM
Quarterly Report
- The company expects that it will need to raise additional financing to accomplish its development plan and fund its working capital.
- 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.
Worse than expected
14 May 2024 4:06 PM
Quarterly Report
- The company's net loss of $14.6 million and the substantial doubt about its ability to continue as a going concern indicate worse than expected results.
Delay expected
14 May 2024 4:06 PM
Quarterly Report
- The company has delayed payment of base rent for the waterpark ground lease, which could lead to a default.
Better than expected
14 May 2024 8:39 AM
Quarterly Report
- The company's revenue increased by 34% year-over-year.
- The net loss attributable to shareholders decreased from $19.6 million to $14.9 million.
- The adjusted EBITDA loss improved from $10.9 million to $2.9 million.
Capital raise
29 April 2024 5:11 PM
Annual Report Amendment
- The company has multiple loan agreements with CH Capital Lending, LLC, and other related parties, some of which have been amended and restated.
- The company has issued Series A, B, and C Preferred Stock to related parties.
- The company has a history of using convertible notes and warrants to raise capital.
Worse than expected
29 April 2024 5:11 PM
Annual Report Amendment
- The company had to amend its annual report due to omitting required information, indicating a deficiency in internal controls or reporting processes.
Capital raise
29 April 2024 4:57 PM
SEC Form 4 Filing
- The document details multiple transactions involving convertible notes and term loans, indicating ongoing capital raising activities.
- CH Capital Lending, LLC advanced additional funds under the 2020 Convertible Term Loan in January and February 2024.
- The company has been paying interest by increasing the principal of the Convertible Notes due 2025.
Capital raise
8 April 2024 5:25 PM
8-K Filing
- The company has the ability to sell up to $14,661,873 of common stock through the at-the-market offering.
- The company amended its equity distribution agreement to increase agent compensation, which may incentivize sales.
Capital raise
25 March 2024 4:37 PM
Annual Results
- The company's authorized but unissued Common Stock and Preferred Stock are available for future issuances without stockholder approval.
- The company could utilize these shares for future offerings to raise additional capital.
Capital raise
21 March 2024 8:20 AM
Quarterly Report
- The company completed a $2.8 million public offering of common stock and warrants to increase institutional ownership and improve stock trading volumes.
Worse than expected
21 March 2024 8:20 AM
Quarterly Report
- The company's net loss for the full year increased significantly compared to the previous year, indicating worse than expected financial performance.
Worse than expected
29 February 2024 5:24 PM
Lease Amendment
- The company has increased its debt and diluted its equity through the warrant issuance.
- The company has increased its base rent obligations.
- The company has pledged a 20% membership interest in Sandlot HOFV Canton SC, LLC, as collateral.
Capital raise
29 February 2024 5:24 PM
Lease Amendment
- The company issued a Series H Common Stock Purchase Warrant to the landlord.
- The warrant allows the landlord to purchase 890,313 shares of the company's common stock.
- The exercise of the warrant could result in a capital raise for the company, but also dilute existing shareholders.
Worse than expected
18 January 2024 5:12 PM
Loan Agreement Amendment
- The company's debt has increased significantly to $12,751,934.09, indicating a worsening financial position despite the asset sale.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.