Stockholders’ Equity

9 Months Ended

Sep. 30, 2023

Stockholders’ Equity [Abstract]

Stockholders’ Equity

Note 5: Stockholders’ Equity

Reverse Stock Split

On September 29, 2022, our stockholders approved amendments to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of our shares of common stock, and our Board approved a final reverse stock split ratio of 1-for-22. The reverse stock split became effective on December 27, 2022. On the effective date, every 22 shares of issued and outstanding common stock were combined and converted into one issued and outstanding share of common stock. Fractional shares were cancelled, and stockholders received cash in lieu thereof in the aggregate amount of $118,344.

The number of authorized shares of common stock and the par value per share of common stock remains unchanged. A proportionate adjustment was also made to the maximum number of shares of common stock issuable under the Hall of Fame Resort & Entertainment Company Amended 2020 Omnibus Incentive Plan (the “Plan”).

As a result, the number of shares and income (loss) per share disclosed throughout this Report on Form 10-Q have been retrospectively adjusted to reflect the reverse stock split.

Where applicable, the disclosures below have been adjusted to reflect the 1-for-22 reverse stock split effective December 27, 2022.

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, without stockholder approval, of 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. The Series A Preferred Stock is mandatorily redeemable, and therefore classified as a liability on the Company’s condensed consolidated balance sheets within Notes Payable, net.

2020 Omnibus Incentive Plan

On July 1, 2020, the Company’s omnibus incentive plan (the “2020 Omnibus Incentive Plan”) became effective immediately. 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 82,397 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 181,818 the number of shares of Common Stock, that will be available for issuance under the 2020 Omnibus Incentive Plan. On June 7, 2023, the Company’s stockholders further approved an amendment to increase by 275,000 the number of shares available under the 2020 Omnibus Incentive Plan. As of September 30, 2023, 160,498 shares remained available for issuance under the 2020 Omnibus Incentive Plan.

Equity Distribution Agreement

On September 30, 2021, the Company entered into an Equity Distribution Agreement with Wedbush Securities Inc. and Maxim Group LLC with respect to an at-the-market offering program under which the Company may, from time to time, offer and sell shares of the Company’s Common Stock having an aggregate offering price of up to $50,000,000 (as of September 30, 2023). From January 1 through September 30, 2023, there were 4,878 shares sold. Subsequent to September 30, 2023, the Company amended the Equity Distribution Agreement and reduced its availability. See Note 13 – Subsequent Events.

Issuance of Restricted Stock Awards

The Company’s activity in restricted Common Stock was as follows for the nine months ended September 30, 2023:

	Number of shares			Weighted average grant date fair value
Non–vested at January 1, 2023		-		$	-
Granted		15,318		$	9.15
Vested		(15,318	)	$	9.15
Non–vested at September 30, 2023		-		$

For the three months ended September 30, 2023 and 2022, stock-based compensation related to restricted stock awards was $43,273 and $177,411, respectively. For the nine months ended September 30, 2023 and 2022, stock-based compensation related to restricted stock awards was $140,202 and $1,630,871, respectively. Stock-based compensation related to restricted stock awards was included as a component of “Operating expenses” in the condensed consolidated statements of operations. As of September 30, 2023, unamortized stock-based compensation costs related to restricted share arrangements were $0.

Issuance of Restricted Stock Units

During the nine months ended September 30, 2023, the Company granted an aggregate of 112,033 Restricted Stock Units (“RSUs”) to its employees and directors, of which 106,001 were granted under the 2020 Omnibus Incentive Plan and 6,032 were granted under the HOFV 2023 Inducement Plan. The RSUs were valued at the value of the Company’s Common Stock on the date of grant, which approximated $14.02 per share 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 RSUs was as follows for the nine months ended September 30, 2023:

	Number of shares			Weighted average grant date fair value
Non–vested at January 1, 2023		134,799		$	28.74
Granted		112,033		$	14.02
Vested		(74,786	)	$	29.93
Forfeited		(11,411	)	$	13.65
Non–vested at September 30, 2023		160,635		$	18.99

For the three months ended September 30, 2023 and 2022, the Company recorded $591,346 and $529,549, respectively, in stock-based compensation expense related to restricted stock units. For the nine months ended September 30, 2023 and 2022, the Company recorded $1,931,924 and $1,618,508, respectively, in stock-based compensation expense related to restricted stock units. Stock-based compensation expense is a component of “Operating expenses” in the condensed consolidated statements of operations. As of September 30, 2023, unamortized stock-based compensation costs related to restricted stock units were $1,720,679 and will be recognized over a weighted average period of 1.5 years.

Issuance of Performance Stock Units

During the nine months ended September 30, 2023, the Company granted an aggregate of 88,965 Performance Stock Units (“PSUs”) to its Chief Executive Officer. The PSUs were valued at the value of the Company’s Common Stock on the date of grant, which approximated $9.62 per share for these awards. The PSUs vest upon the achievement of certain performance targets.

The Company’s activity in PSUs was as follows for the nine months ended September 30, 2023:

	Number of shares		Weighted average grant date fair value
Non–vested at January 1, 2023		-
Granted		88,965	$	9.62
Vested		-
Forfeited		-
Non–vested at September 30, 2023		88,965	$	9.62

For the three months ended September 30, 2023 and 2022, the Company recorded $148,540 and $0, respectively, in stock-based compensation expense related to performance stock units. For the nine months ended September 30, 2023 and 2022, the Company recorded $448,084 and $0, respectively, in stock-based compensation expense related to performance stock units. Stock-based compensation expense is a component of “Operating expenses” in the condensed consolidated statements of operations. As of September 30, 2023, unamortized stock-based compensation costs related to restricted stock units were $151,022 and will be recognized over a weighted average period of 0.3 years.

Warrants

The Company’s warrant activity was as follows for the nine months ended September 30, 2023:

	Number of Shares		Weighted Average Exercise Price (USD)		Weighted Average Contractual Life (years)		Intrinsic Value (USD)
Outstanding – January 1, 2023		2,003,649	$	149.09		2.86	$	-
Outstanding – September 30, 2023		2,003,649	$	149.09		2.11	$	-
Exercisable – September 30, 2023		2,003,649	$	149.09		2.11	$	-

Amended and Restated Series C Warrants

On March 1, 2022, in connection with the amendment to the IRG Split Note (as described in Note 4), the Company amended its Series C Warrants to extend the term of the Series C Warrants to March 1, 2027. The exercise price of $30.80 per share was not amended, but the amendments subject the exercise price to a weighted-average antidilution adjustment. The amendments also remove certain provisions regarding fundamental transactions, which subsequently allowed the Series C Warrants to be derecognized as a liability and classified as equity.

The Company accounted for this modification as a cost of the IRG Split Note, whereby the Company calculated the incremental fair value of the Series C Warrants and recorded them as a discount against the IRG Split Note.

On November 7, 2022, the Company further amended the Series C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for more information.

The following assumptions were used to calculate the fair value of Series C Warrants in connection with the modifications:

	Original Series C Warrants			March 1, 2022 Modification			November 7, 2022 Modification
Term (years)		3.8			5.0			3.1
Stock price	$	22.22		$	22.22		$	14.52
Exercise price	$	30.80		$	30.80		$	12.77
Dividend yield		0.0	%		0.0	%		0.0	%
Expected volatility		54.7	%		50.8	%		63.9	%
Risk free interest rate		1.5	%		1.5	%		4.8	%
Number of shares		455,867			455,867			455,867
Aggregate fair value	$	3,336,000		$	3,648,000		$	3,230,000

Amended and Restated Series D Warrants issue to CH Capital Lending

On March 1, 2022, in connection with the amendment to the CH Capital Loan (as described in Note 4), the Company amended the Series D Warrants issued to CH Capital Lending to extend the term of such Series D Warrants to March 1, 2027. The exercise price of $151.80 per share was not amended, but the amendments subject the exercise price to a weighted-average antidilution adjustment.

On November 7, 2022, the Company further amended the Series C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for more information.

The following assumptions were used to calculate the fair value of Series D Warrants in connection with the modifications:

	Original Series D Warrants			March 1, 2022 Modification			November 7, 2022 Modification
Term (years)		3.8			3.8			3.1
Stock price	$	22.22		$	22.22		$	14.52
Exercise price	$	151.80		$	151.80		$	12.77
Dividend yield		0.0	%		0.0	%		0.0	%
Expected volatility		63.5	%		50.8	%		63.9	%
Risk free interest rate		1.3	%		1.6	%		4.8	%
Number of shares		111,321			111,321			111,321
Aggregate fair value	$	50,000		$	138,000		$	910,000

7.00% Series A Cumulative Redeemable Preferred Stock

On January 12, 2023, the Company issued to ADC LCR Hall of Fame Manager II, LLC (the “Series A Preferred Investor”) 1,600 shares of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a price of $1,000 per share for an aggregate purchase price of $1,600,000. On January 23, 2023, the Company issued to the Series A Preferred Investor 800 additional shares of the Company’s Series A Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $800,000. Additionally, on May 2, 2023, the Company issued to the Series A Preferred Investor 800 shares of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a price of $1,000 per share for an aggregate purchase price of $800,000. The Company paid the Series A Preferred Investor an origination fee of 2% of the aggregate purchase price for each issuance. The issuance and sale of the shares to the Series A Preferred Investor is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Series A Preferred Stock is not convertible into Common Stock. The Series A Preferred Investor has represented to the Company that it is an “accredited investor” as defined in Rule 501 of the Securities Act and that the shares are being acquired for investment purposes and not with a view to, or for sale in connection with, any distribution thereof.

Compliance with Nasdaq Minimum Bid Requirement

As previously reported, on May 24, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive business days the bid price for the Company’s common stock, par value $0.0001 per share (“Common Stock”), had closed below the minimum requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

On January 11, 2023, the Company received written notice from the Staff of Nasdaq informing the Company that it has regained compliance with the Minimum Bid Requirement because Nasdaq has determined that for 10 consecutive business days, the closing bid price of the Company’s Common Stock was at or above the Minimum Bid Requirement. Accordingly, Nasdaq has advised that the matter is now closed.

Hall of Fame Resort & Entertainment Company 2023 Inducement Plan

On January 24, 2023, the Company’s board of directors adopted the Hall of Fame Resort & Entertainment Company 2023 Inducement Plan (the “Inducement Plan”).  The Inducement Plan is not subject to stockholder approval.  The aggregate number of shares of Common Stock that may be issued or transferred pursuant to awards covered by the Plan (including existing inducement awards amended to be subject to the Inducement Plan) is 110,000.  Awards covered by the Inducement Plan include only inducement grants under Nasdaq Listing Rule 5635(c)(4).