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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Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from Inception through June 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 June 30, 2022, we had net income of $909,871, which consisted of operating costs of $413,050, interest income on marketable securities held in our Trust Account of $277,120, and a gain due to a decrease in fair value of warrant liabilities of $1,045,801.

For the six months ended June 30, 2022, we had a net income of $2,631,178, which consisted of operating costs of $995,459, interest income on marketable securities held in our Trust Account of $295,311, and a gain due to a decrease in fair value of warrant liabilities of $3,331,326.

For the three months ended June 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 due to an increase in fair value of warrant liabilities of $1,041,466.

For the six months ended June 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 due to an increase in fair value of warrant liabilities of $1,179,983.

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 statement of operations.

As of June 30, 2022 and December 31, 2021, we had marketable securities held in the Trust Account of $200,311,364 (including $311,364 of interest income) and $200,016,053 (including $16,053 of interest income), respectively, consisting of investments in qualifying money market funds that invest solely in U.S. treasury securities.

For the six months ended June 30, 2022, cash used in operating activities was $1,450,300. Net income of $2,631,177 was affected by interest income on marketable securities held in our Trust Account of $295,311, change in fair value of warrant liabilities of $3,331,326, and changes in operating assets and liabilities, which used $454,84 1

of cash.



For the six months ended June 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 $8
9
2
,
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.


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As of June 30, 2022 and December 31, 2021, we had cash of $421,378 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.

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 June 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 Capital Loam
for general working capital purposes.

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.

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


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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 between 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.

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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