References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer toGaming & Hospitality Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer toAffinity 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. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Special Note Regarding Forward-Looking Statements This Quarterly Report 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 Risk Factors section of the Company's final prospectus for its Initial Public Offering filed with theU.S. Securities and Exchange Commission (the "SEC"). The Company's securities filings can be accessed on the EDGAR section of theSEC'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 theState of Delaware onMarch 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 Initial Public Offering 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. Results of Operations We have neither engaged in any operations nor generated any revenues to date. Our only activities from Inception throughJune 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, subsequent to the Initial Public Offering, 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 Initial Public Offering 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 endedJune 30, 2021 , we had a net loss of$1,385,296 , which consisted of operating costs of$350,391 , interest income on marketable securities held in our Trust Account of$6,561 , and a loss in fair value of warrant liabilities of 1,041,466. For the six months endedJune 30, 2021 , we had a net loss of$2,490,169 , which consisted of operating costs of$1,319,407 , interest income on marketable securities held in our Trust Account of$9,221 , and a loss in fair value of warrant liabilities of 1,179,983. 17 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources OnFebruary 5, 2021 , we consummated the Initial Public Offering of 20,000,000 Units at a price of$10.00 per Unit, including 2,500,000 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 Initial Public Offering, 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 Initial Public Offering, 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 statement of operations. As ofJune 30, 2021 , we had marketable securities held in the Trust Account of$200,009,221 (including$9,221 of interest income) consisting ofU.S. Treasury Bills with a maturity of 185 days or less. For the six months endedJune 30, 2021 , cash used in operating activities was$1,866,641 . Net loss of$2,490,169 was affected by interest income on marketable securities held in our Trust Account of$9,221 , transaction costs allocable to warrant liabilities of$344,981 , change in fair value of warrant liabilities of$1,179,983 , and changes in operating assets and liabilities, which used$892,215 of cash. 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 ofJune 30, 2021 , we had cash of$1,177,628 held outside the Trust Account. 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. Up to$1,500,000 of such loans may be convertible into units identical to the Private Units, at a price of$10.00 per warrant at the option of the lender. 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. 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 ofJune 30, 2021 . 18 -------------------------------------------------------------------------------- Table of Contents Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay Affinity Gaming, 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 Gaming, an affiliate of our Sponsor, to our officers in consideration of the time dedicated to us by each ofMs. Higgins , our Chief Executive Officer,Mr. Fiocco , our Chief Operating Officer and Secretary, andMr. Scrivens , our Chief Financial Officer, and reimbursement of expenses. We began incurring these fees onFebruary 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. The underwriters are entitled to a deferred fee of$0.35 per 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 Policies The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following 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' equity section of our condensed balance sheets. Net Loss Per Share of Common Stock We apply the two-class method in calculating earnings per share. 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 loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income 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. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. 19
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