References in this Quarterly Report on Form 10-Q to "we," "us" or the "Company" refer to Gaming & Hospitality Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Affinity Gaming Holdings, L.L.C. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under the headings "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021 (the "Form 10-K") filed with the Securities and Exchange Commission (the "SEC") on March 28, 2022 and "Item 1A. Risk Factors" of our Quarterly Report on Form 10-Q filed with the SEC on May 13, 2022 (the "Q1 Form 10-Q").

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the "Item 1A. Risk Factors" section of our Form 10-K and "Item 1A. Risk Factors" of our Q1 Form 10-Q. The Company's securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a blank check company formed under the laws of the State of Delaware on March 4, 2020 ("Inception") for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the "Business Combination"). We intend to effectuate our Business Combination using cash from the proceeds of the IPO and the sale of the Private Units, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial Business Combination will be successful.


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Recent Developments:

On November 14, 2022, the Company filed a preliminary proxy statement in connection with a special meeting to be held for the purpose of voting on: (i) a proposal to permit the Company to liquidate and wind up early by amending the Company's Amended and Restated Certificate of Incorporation (the "Charter") to (i) change the date by which the Company must consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, which we refer to as our initial business combination, from February 5, 2023 (the "Original Termination Date") to such other date as shall be determined by the Board and publicly announced by the Company, provided that such other date shall be no sooner than the date of the effectiveness of the amendment to the Charter pursuant to the DGCL and no later than December 30, 2022 (the "Amended Termination Date"), (ii) remove the Redemption Limitation (as defined in the Charter) to allow the Company to redeem 20,000,000 shares of Class A common stock, par value $0.0001 per share, initially included in the units sold as part of the IPO (the "Public Shares"), notwithstanding the fact that such redemption would result in the Company having net tangible assets of less than $5,000,001, and (iii) allow the Company to remove up to $100,000 of interest earned on the amount on deposit in the Trust Account (as defined below) prior to redeeming the Public Shares in connection with the Special Meeting in order to pay dissolution expenses (the "Charter Amendment Proposal"); and (ii) amend the Investment Management Trust Agreement, dated February 2, 2021 (the "Trust Agreement"), by and between the Company and Continental Stock Transfer & Trust Company, a New York corporation, as trustee ("Continental") to change the date on which Continental must commence liquidation of the trust account (the "Trust Account") established in connection with the Company's initial public offering (the "IPO") from the Original Termination Date to the Early Termination Date (such proposal, the "Early Termination Trust Amendment Proposal" and together with the Charter Amendment Proposal, the "Amendment Proposals"); and (iii) to approve the adjournment of the Special Meeting from time to time to solicit additional proxies in favor of the Amendment Proposals or if otherwise determined by the chairperson of the Special Meeting to be necessary or appropriate (the "Adjournment Proposal," and with the Charter Amendment Proposal and the Amendment Proposals, the "Proposals").

If the Proposals are approved, and because the Company will not be able to complete an initial Business Combination by the Amended Termination Date, the Company will immediately after the Special Meeting, cease all operations, except for the purpose of winding up and as promptly as reasonably possible, but not more than ten business days thereafter, redeem all Public Shares (the "Mandatory Redemption"). As promptly as reasonably possible following such Mandatory Redemption, and subject to the approval of the Company's then remaining stockholders and the Board, in accordance with applicable law, dissolve and liquidate, subject in each case to the Company's obligations under the General Corporation Law of the State of Delaware to provide for claims of creditors and the requirements of other applicable law.

Pursuant to the amended and restated certificate, a Public Stockholder shall be provided with the opportunity to redeem their Public Shares for cash if the Charter Amendment Proposal is approved. Notwithstanding the foregoing, if the Charter Amendment Proposal is approved, and because the Company will not be able to complete an initial Business Combination by the Amended Termination Date, the Company will be obligated to redeem all Public Shares as promptly as reasonably possible after the Amended Termination Date. Therefore, no action is required by our Public Stockholders to redeem their Public Shares. If the Proposals are approved, the Public Shares will be automatically redeemed as part of the Mandatory Redemption.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from Inception through September 30, 2022 were organizational activities, those necessary to prepare for the IPO, described below, and, subsequent to the IPO, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination, at the earliest. We expect to generate non-operating income in the form of interest income on marketable securities held after the IPO in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended September 30, 2022, we had net income of $982,462, which consisted of operating costs of $359,268, interest income on marketable securities held in our Trust Account of $903,600, income tax expense of $178,269, and a gain due to a decrease in fair value of warrant liabilities of $616,399.

For the nine months ended September 30, 2022, we had a net income of $3,613,640, which consisted of operating costs of $1,354,727, interest income on marketable securities held in our Trust Account of $1,198,911, income tax expense of $178,269, and a gain due to a decrease in fair value of warrant liabilities of $3,947,725.

For the three months ended September 30, 2021, we had a net income of $1,341,869, which consisted of operating costs of $1,090,145, interest income on marketable securities held in our Trust Account of $2,790, and a loss due to an increase in fair value of warrant liabilities of $2,429,224.

For the nine months ended September 30, 2021, we had a net loss of $1,148,300, which consisted of operating costs of $2,409,552, interest income on marketable securities held in our Trust Account of $12,011, and a loss due to an increase in fair value of warrant liabilities of $1,249,241.

Liquidity and Capital Resources

On February 5, 2021, we consummated the IPO of 20,000,000 Public Units at a price of $10.00 per Public Unit, including 2,500,000 Public Units sold pursuant to the full exercise of the underwriter's over-allotment option, generating gross proceeds of $200,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 777,500 Private Units to the Sponsor at a price of $10.00 per Private Unit, generating gross proceeds of $7,775,000.

Following the IPO, the exercise of the over-allotment option and the sale of the Private Units, a total of $200,000,000 was placed in the Trust Account. We incurred $11,755,731 in transaction costs, including $4,000,000 of underwriting fees, $7,000,000 of deferred underwriting fees and $755,731 of other costs. Of these transaction costs, $344,981 were determined to be allocable to the warrant liabilities and were expensed in formation costs and other operating expenses within the condensed statements of operations.

As of September 30, 2022 and December 31, 2021, we had marketable securities held in the Trust Account of $201,214,964 (including $1,214,964 of interest income) and $200,016,053 (including $12,011 of interest income), respectively, consisting of investments in qualifying money market funds that invest solely in U.S. treasury securities.

For the nine months ended September 30, 2022, cash used in operating activities was $2,168,955. Net income of $3,613,640 was affected by interest income on marketable securities held in our Trust Account of $1,198,911, change in fair value of warrant liabilities of $3,947,725, and changes in operating assets and liabilities, which used $635,961 of cash.

For the nine months ended September 30, 2021, cash used in operating activities was $2,219,963. Net loss of $1,148,300 was affected by interest income on marketable securities held in our Trust Account of $12,011, transaction costs allocable to warrant liabilities of $344,981, change in fair value of warrant liabilities of $1,249,241, and changes in operating assets and liabilities, which used $155,392 of cash.


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We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions and income taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of September 30, 2022 and December 31, 2021, we had cash of $702,723 and $371,678 held outside the Trust Account, respectively. We intend to use the funds held outside the Trust Account primarily for working capital purposes and to identify and evaluate target businesses, perform business due diligence on prospective target businesses, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination. In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment.

On November 11, 2021, the Sponsor issued an unsecured promissory note to the Company (the "Working Capital Loan"), pursuant to which the Company may borrow up to an aggregate principal amount of $5,000,000. The Working Capital Loan is non-interest bearing and will be repaid upon completion of an initial Business Combination, or, at the Sponsor's discretion, up to $1,500,000 of the balance of the Working Capital Loan may be converted upon completion of an initial Business Combination into Private Units at a price of $10.00 per Private Unit. On January 26, 2022, the Company borrowed $1,500,000 under the Working Capital Loan for general working capital purposes. On September 26, 2022, the Company borrowed an additional $1,000,000 under the Working Capital Loan.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. If we are unable to complete our Business Combination within the time period set forth in our amended and restated certificate of incorporation because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2022.

Contractual Obligations

On November 11, 2021, the Sponsor issued an unsecured promissory note to the Company evidencing the Working Capital Loan, pursuant to which the Company may borrow up to an aggregate principal amount of $5,000,000. The Working Capital Loan is non-interest bearing and will be repaid upon completion of an initial Business Combination, or, at the Sponsor's discretion, up to $1,500,000 of the balance of the Working Capital Loan may be converted upon completion of an initial Business Combination into Private Units at a price of $10.00 per Private Unit. On January 26, 2022, the Company borrowed $1,500,000 under the Working Capital Loan for general working capital purposes. On September 26, 2022, the Company borrowed an additional $1,000,000 under the Working Capital Loan.

We have an agreement to pay Affinity Interactive, an affiliate of the Sponsor, a monthly fee of $33,333 for office space, utilities, secretarial and administrative support services, reimbursement of a portion of the compensation paid by Affinity Interactive, an affiliate of our Sponsor, to our officers in consideration of the time dedicated to us by each of Ms. Higgins, our Chief Executive Officer, Mr. Fiocco, our Chief Operating Officer and Secretary, and Mr. Scrivens, our Chief Financial Officer, and reimbursement of expenses. We began incurring these fees on February 3, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company's liquidation in accordance with its amended and restated certificate of incorporation.


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The underwriters are entitled to a deferred fee of $0.35 per Public Unit, or $7,000,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

Critical Accounting Estimates

This management's discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company has identified the following as its critical accounting policies.

Common Stock Subject to Possible Redemption

We account for common stock subject to possible redemption in accordance with the guidance in ASC 480. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events.

Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of stockholders' deficit section of our condensed balance sheets.

Net Income (Loss) Per Share of Common Stock

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." The Company has three classes of shares, which are referred to as Class A common stock subject to redemption, Non-redeemable Class A common stock, and Class B common stock. Income and losses are shared pro rata among the three classes of shares. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Common stock subject to possible redemption which is not currently redeemable and is not redeemable at fair value, has been excluded from the calculation of basic net income (loss) per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income (loss) is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.

Warrant Liabilities

We account for the warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the applicable authoritative guidance in ASC 480, and ASC 815. The assessment considers whether they are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own common shares and whether the holders of the warrants could potentially require "net cash settlement" in a circumstance outside of the Company's control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the warrants and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, such warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, such warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants are recognized as a non-cash gain or loss on the statements of operations.


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Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.

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