Gaming & Hospitality Acquisition 10Q 2021 Q3 Quarterly report

Gaming & Hospitality Acquisition (GHAC) 10-Q2021 Q3 Quarterly report

Content analysis

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File

No. 001-39987

GAMING & HOSPITALITY ACQUISITION CORP.

(Exact name of registrant as specified in its charter)


Delaware		84-5014306
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3755 Breakthrough Way #300 Las Vegas, Nevada		89135
(Address of principal executive offices)		(Zip Code)

(800)

211-8626

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section

12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Units, each consisting of one share of Class A common stock, $0.0001 par value, and one-third of one redeemable warrant to purchase one share of Class A common stock	GHACU	The Nasdaq Stock Market LLC
Class A common stock, par value $0.0001 per share	GHAC	The Nasdaq Stock Market LLC
Redeemable warrants, each exercisable for one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment	GHACW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☒ No ☐

As of November 12, 2021, there were 20,777,500 shares of Class A common stock, $0.0001 per value, and 5,000,000 shares of Class B common stock, $0.0001 par value, issued and outstanding.

Table of Contents

GAMING & HOSPITALITY ACQUISITION CORP.

FORM

10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS


	Page
Part I. Financial Information		1
Item 1. Interim Financial Statements		1
Condensed Balance Sheets		1
Unaudited Condensed Statements of Operations		2
Unaudited Condensed Statements of Changes in Stockholders’ Equity (Deficit)		3
Unaudited Condensed Statement of Cash Flows		4
Notes to Unaudited Condensed Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk		18
Item 4. Controls and Procedures		19
Part II. Other Information		20
Item 1. Legal Proceedings		20
Item 1A. Risk Factors		20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 3. Defaults Upon Senior Securities		20
Item 4. Mine Safety Disclosures		20
Item 5. Other Information		20
Item 6. Exhibits		21
Part III. Signatures		22

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements.

GAMING & HOSPITALITY ACQUISITION CORP.

CONDENSED BALANCE SHEETS


	September 30, 2021			December 31, 2020
	(Unaudited)
ASSETS
Current assets
Cash	$	824,306		$	25,000
Prepaid expenses		740,237			—

Total current assets		1,564,543			25,000
Deferred offering costs		—			550,046
Cash held in Trust Account		200,012,011			—

Total assets	$	201,576,554		$	575,046

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	595,794		$	526,759
Advances from Sponsor		—			34,236

Total current liabilities		595,794			560,995
Warrant liabilities		4,848,084			—
Deferred underwriting fee payable		7,000,000			—

Total liabilities		12,443,878			560,995

Commitments and contingencies		0			0
Class A common stock subject to possible redemption, $0.0001 par value, 20,000,000 and 0 shares, at September 30, 2021 and December 31, 2020, respectively, at redemption value		200,000,000			—

Stockholders’ equity (deficit)
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN outstanding		0—			0—
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 777,500 and 0 shares issued and outstanding (excluding 20,000,000 and 0 shares subject to possible redemption), at September 30, 2021 and December 31, 2020, respectively		78			0
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,000,000 shares issued and outstanding		500			500
Additional paid in capital		0			24,500
Accumulated deficit		(10,867,902	)		(10,949	)

Total stockholders’ equity (deficit)		(10,867,324	)		14,051

Total liabilities and stockholders’ equity	$	201,576,554		$	575,046

See accompanying notes to the unaudited condensed financial statements.


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Table of Contents

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021


	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
Formation costs and other operating expenses	$	1,090,145		$	2,409,552

Loss from operations		(1,090,145	)		(2,409,552	)
Other income (expense):
Interest income on marketable securities held in Trust Account		2,790			12,011
Change in fair value of warrant liabilities		2,429,224			1,249,241

Other income (expense), net		2,432,014			1,261,252

Net income (loss)	$	1,341,869		$	(1,148,300	)

Weighted average number of common shares outstanding:
Class A - Public shares		20,000,000			17,500,000
Class A - Private shares		777,500			680,313
Class B - Common stock		5,000,000			4,921,875
Basic and diluted net income (loss) per share:
Class A - Public shares	$	0.05		$	(0.05	)

Class A - Private shares	$	0.05		$	(0.05	)

Class B - Common stock	$	0.05		$	(0.05	)

See accompanying notes to the unaudited condensed financial statements.


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UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021


	Class A				Class B				Additional						Total
	Common Stock				Common Stock				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance—December 31, 2020		—		—		5,000,000	$	500	$	24,500		$	(10,949	)	$	14,051

Issuance of common stock (private units), net of proceeds allocated to private warrant liability		777,500		78		0		0		7,544,264			0			7,544,342
Net loss		—		—						—			(1,104,873	)		(1,104,873	)
Accretion to Class A common stock redemption amount		—		—		—		—		(7,568,764	)		(9,708,653	)		(17,277,417	)

Balance - March 31, 2021 (Unaudited)		777,500	$	78		5,000,000	$	500	$	0		$	(10,824,475	)	$	(10,823,897	)

Net loss		—		—		—		—		—			(1,385,296	)		(1,385,296	)

Balance - June 30, 2021 (Unaudited)		777,500	$	78		5,000,000	$	500	$	0		$	(12,209,771	)	$	(12,209,193	)

Net income		—		—		—		—		—			1,341,869			1,341,869

Balance - September 30, 2021 (Unaudited)		777,500	$	78		5,000,000	$	500	$	0		$	(10,867,902	)	$	(10,867,324	)

See accompanying notes to the unaudited condensed financial statements.


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UNAUDITED CONDENSED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021


Cash flow from operating activities:
Net loss	$	(1,148,300	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest income earned on marketable securities held in Trust Account		(12,011	)
Change in fair value of warrant liabilities		(1,249,241	)
Transaction costs allocable to warrant liabilities		344,981
Changes in operating assets and liabilities
Prepaid expenses		(740,237	)
Accounts payable and accrued expenses		584,845

Net cash used in operating activities		(2,219,963	)

Cash flow from investing activities:
Investment of cash in Trust Account		(200,000,000	)

Net cash used in investing activities		(200,000,000	)

Cash flows from financing activities:
Proceeds from promissory note—Sponsor		37,470
Paydown of promissory note—Sponsor		(71,706	)
Payment of deferred offering costs		(4,721,495	)
Proceeds from issuance of common stock (public units)		200,000,000
Proceeds from issuance of common stock (private units)		7,775,000

Net cash provided by financing activities		203,019,269

Net change in cash		799,306

Cash at the beginning of the period		25,000
Cash at the end of the period	$	824,306

Supplemental disclosure of non-cash activities:
Deferred underwriting fees payable	$	7,000,000

Initial classification of common stock subject to possible redemption	$	200,000,000

Initial measurement of warrants issued in connection with the Initial Public Offering accounted for as liabilities	$	(6,097,325	)

See accompanying notes to the unaudited condensed financial statements.


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Table of Contents

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND PLAN OF BUSINESS OPERATIONS

Gaming and Hospitality Acquisition Corp. (the “Company”) is a blank check company incorporated as a Delaware corporation on March 4, 2020 (“Inception”). The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on the gaming and hospitality sectors.

The Company is sponsored by Affinity Gaming Holdings, L.L.C. (the “Sponsor”), the indirect sole stockholder of Affinity Gaming, a diversified casino gaming company headquartered in Las Vegas, Nevada, and full voting control of the Sponsor is held by entities managed by affiliates of Z Capital Partners, L.L.C. Concurrently with the Business Combination, the Company currently intends to merge with Affinity Gaming. The Company cannot provide any assurance that such a merger with Affinity Gaming will occur at all, or, if it does, it cannot provide any assurance as to the timing or terms thereof. However, the Company will not complete a Business Combination with only Affinity Gaming.

As of September 30, 2021, the Company had not commenced any operations. All activity through September 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”, or “IPO”), which is described in Note 3, and, subsequent to the IPO, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate

non-operating

income in the form of interest income from the proceeds derived from the Initial Public Offering.

The registration statement for the Company’s Initial Public Offering was declared effective on February 2, 2021 (the “Effective Date”). On February 5, 2021, the Company consummated the Initial Public Offering of 20,000,000 units (the “Public Units”), which includes the exercise by the underwriter of its over-allotment option in the amount of 2,500,000 Public Units, at $10.00 per Public Unit, generating gross proceeds of $200,000,000 which is described in Note 3. Each Public Unit consists of one share of Class A common stock of the Company (the “Public Shares”) and

one-third

of one redeemable warrant (the “Public Warrants”).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 777,500 units (the “Private Units”) at a price of $10.00 per Private Unit in a private placement to the Sponsor, generating gross proceeds of $7,775,000. Each Private Unit consists of one share of Class A common stock of the Company (the “Private Shares”) and

one-third

of one redeemable warrant (the “Private Warrants”). See Note 4.

Transaction costs amounted to $11,755,731, consisting of $4,000,000 in cash underwriting fees, $7,000,000 of deferred underwriting fees and $755,731 of other offering 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.

Following the closing of the Initial Public Offering on February 5, 2021, an amount of $200,000,000 ($10.00 per Public Unit) from the gross proceeds of the sale of the Public Units in the Initial Public Offering and the sale of the Private Units was placed in a trust account (the “Trust Account”), located in the United States and will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of the Private Units, although substantially all of the net proceeds are intended to be generally applied toward completing a Business Combination. Furthermore, there is no assurance that the Company will be able to successfully complete a Business Combination.


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As required by Nasdaq rules, the Business Combination will be approved by a majority of the Company’s independent directors. Nasdaq rules also require that the Company must complete one or more Business Combinations having an aggregate fair market value of at least 80% of the value of the assets held in the Trust Account (excluding deferred underwriting commissions and taxes payable on the interest income earned on the Trust Account).

The Company anticipates structuring the Business Combination in such a way so that the post-Business Combination company in which the Company’s Public Stockholders (as defined below) own shares will own or acquire 100% of the equity interests or assets of the target business. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

The Company will provide the holders of its Public Shares with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination at a

per-share

price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the completion of the Business Combination (initially anticipated to be $10.00 per Public Share), including interest earned and not previously released to the Company to pay franchise and income taxes, less up to $100,000 of interest to pay dissolution expenses, divided by the number of then outstanding Public Shares, subject to certain limitations. The

per-share

amount distributed to investors who properly redeem their shares will not be reduced by deferred underwriting commissions the Company will pay to the underwriter. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Company’s Sponsor, officers and directors (the “Initial Stockholders”) have agreed to waive their redemption rights with respect to any Founder Shares (as defined below) (see Note 5) and Private Shares held by them (see Note 4) and any Public Shares they may acquire during or after the Initial Public Offering in connection with a Business Combination or otherwise.

The opportunity to redeem all or a portion of Public Shares will be provided either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek stockholder approval under the law or Nasdaq listing requirements.

In the event the Company conducts redemptions pursuant to the tender offer rules, the offer to redeem will remain open for at least 20 business days, in accordance with Rule

14e-1(a)

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Company will not be permitted to complete the Business Combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on the Public Stockholders not tendering more than a specified number of Public Shares, which number will be based on the requirement that the Company may not redeem Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon completion of the Business Combination and after payment of the deferred underwriting commissions (so that the Company is not subject to the “penny stock” rules of the Securities and Exchange Commission (the “SEC”)) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to the Business Combination. If the Public Stockholders tender more shares than the Company has offered to purchase, the Company will withdraw the tender offer and not complete the Business Combination.

Notwithstanding the foregoing redemption rights, if the Company seeks stockholder approval of the Business Combination and does not conduct redemptions pursuant to the tender offer rules, the amended and restated certificate of incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.

The Company will have 24 months to complete a Business Combination (the “Combination Period”). If the Company has not completed a Business Combination with the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a

per-share

price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and


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not previously released to the Company to pay franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to warrants, which will expire worthless if the Company fails to complete an initial Business Combination within the Combination Period.

In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the

Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of amounts to pay the Company’s franchise and income taxes, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account, nor will it apply to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revision to Previously Reported Financial Statements

During the preparation of the Company’s unaudited condensed financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it should revise its financial statements to classify all Class A common stock subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”), paragraph

10-S99,

redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A common stock in permanent equity, or total stockholders’ equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. The Company considered that the threshold would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside equity. As a result, the Company revised its previously filed financial statements to classify all of its Class A common stock as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering and in accordance with ASC 480. The change in the carrying value of the redeemable shares of Class A common stock at the Initial Public Offering resulted in a decrease of approximately $5.7 million in additional

paid-in

capital and a charge of approximately $9.7 million to accumulated deficit, as well as a reclassification of 934,169 shares of Class A common stock from permanent equity to temporary equity. The Company will present this revision in a prospective manner in all future filings. Under this approach, the previously issued balance sheet as of February 5, 2021 and Form

10-Qs

will not be amended, but historical amounts presented in the current and future filings will be recast to be consistent with the current presentation, and an explanatory footnote will be provided.

The impact of the revision to the unaudited condensed balance sheets as of March 31, 2021 and June 30, 2021, is a reclassification of $15.8 million and $17.2 million, respectively, from total stockholders’ equity to Class A common stock subject to possible redemption, resulting in a decrease of $6.1 million and $7.5 million, respectively, in additional

paid-in-capital,

a decrease of $9.7 million for both periods, as well as an increase in the supplemental disclosure of noncash activities for the initial value of Class A common stock subject to possible redemption of $15.4 million. There is no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss). In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company has revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form

10-Q

and Article 8 of Regulation

S-X

of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.

This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.


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Use of Estimates

The preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.

Making estimates requires management to exercise significant judgm

nt. It is at least reasonably possible that the estimate of the effect of a condition, situation, or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimates, could change in the near term due to one or more future confirming events. Accordingly, actual results could differ from those estimates.

Net Income (Loss) Per Common Share

The Company complies with accounting and disclosure requirements of Financial Accounting Standards Board (“FASB”) ASC Topic 260, “Earnings Per Share.” The Company has three classes of shares, which are referred to below 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. The Company has not considered the effect of warrants sold in the Initial Public Offering in the calculation of diluted income (loss) per share, since the exercise of the warrants are contingent upon the occurrence of future events. For the three and nine months ended September 30, 2021, the Company did not have any dilutive warrants, securities or other contracts that could potentially, be exercised or converted into common shares. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.

A reconciliation of net income (loss) per common share as adjusted for the portion of income that is attributable to common shares subject to redemption is as follows:


	For the three months ended September 30, 2021						For the nine months ended September 30, 2021
	Class A common stock subject to redemption		Non-redeemable Class A common stock		Class B Common Stock		Class A common stock subject to redemption			Non-redeemable Class A common stock			Class B Common Stock
Basic and diluted net income (loss) per common stock
Numerator:
Allocation of net income (loss)	$	1,041,117	$	40,473	$	260,279	$	(869,842	)	$	(33,815	)	$	(244,643	)
Denominator:
Basic and diluted weighted average shares outstanding		20,000,000		777,500		5,000,000		17,500,000			680,313			4,921,875

Basic and diluted net income (loss) per common stock	$	0.05	$	0.05	$	0.05	$	(0.05	)	$	(0.05	)	$	(0.05	)

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. At September 30, 2021, the assets held in the Trust Account were held in marketable securities deemed to be cash equivalents. The Company had 0 cash equivalents in its operating account as of September 30, 2021 and December 31, 2020


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Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and is measured at redemption value. Conditionally redeemable common stock (including common stock that features redemption rights that is 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. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets. The Company determined the common stock subject to possible redemption to be equal to the redemption value of approximately $10.00 per share of Class A common stock.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. The Class A common stock reflected in the

condensed balance sheet is reconciled in the following table as of September 30, 2021:


Gross proceeds	$	200,000,000
Less: Proceeds allocated to Public Warrants		(5,866,667	)
Less: Class A common stock issuance costs		(11,410,750	)
Add: Accretion of carrying value to redemption value		17,277,417

Class A common stock subject to possible redemption		200,000,000

There was 0 Class A common stock outstanding as of December 31, 2020.

Offering Costs

Offering costs consist principally of underwriting, legal, and other expenses incurred through the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs of approximately $11.4 million were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as

non-operating

expenses in the condensed statements of operations. Offering costs associated with the Class A common stock were charged against the carrying value of the shares of Class A common stock upon the completion of the Initial Public Offering.

Warrant Liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The Company evaluated the Public Warrants and the Private Warrants (collectively, the “Warrants”) (Note 3, Note 4, Note 8 and Note 9) in accordance with ASC

815-40,

“Derivatives and Hedging — Contracts in Entity’s Own Equity,” and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the condensed balance sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC Topic 820, “Fair Value Measurement,” with changes in fair value recognized in the condensed statement of operations in the period of change.

Income Taxes

The Company accounts for income taxes under ASC Topic 740, “Income Taxes,” (“ASC 740”) which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized for the differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2021, there were 0 unrecognized tax benefits and 0 amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Deferred income taxes were deemed to be de minimis as of September 30, 2021 and December 31, 2020.

Components of Equity

Upon consummation of the IPO, the Company issued Class A common stock and Warrants. The Company allocated the proceeds received from the issuance using the

with-and-without

method. Under that method, the Company first allocated the proceeds to the Warrants based on their initial fair value measurement of $6,097,325 and then allocated the remaining proceeds, net of underwriting discounts and offering costs of $11,410,750, to the Class A common stock. The 20,000,000 shares of Class A common stock are presented within temporary equity, as these shares are subject to redemption upon the occurrence of events not solely within the Company’s control.


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Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limits of $250,000. The Company has not experienced losses on these accounts, and management believes the Company is not exposed to significant risks on such accounts.

Fair Value of Financial Instruments

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:


Level 1:		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:		Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3:		Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

See Note 9 for additional information on assets and liabilities measured at fair value.

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2020-06,

Debt—Debt with Conversion and Other Options (Subtopic

470-20)

and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

815-40)

(“ASU

2020-06”)

to simplify accounting for certain financial instruments. ASU

2020-06 eliminates

the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU

2020-06 amends

the diluted earnings per share guidance, including the requirement to use the

if-converted

method for all convertible instruments. Under the Company’s current filing status, ASU

2020-06 is

effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU

2020-06 would

have on its financial position, results of operations or cash flows.

The Company’s management does not believe that there are any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

NOTE 3. INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering, the Company sold 20,000,000 Public Units at $10.00 per Public Unit (which includes the exercise by the underwriter of its over-allotment option of 2,500,000 units). Each Public Unit consists of one Public Share and

one-third

of one Public Warrant. Each whole Public Warrant entitles the holder thereof to purchase 1 share of the Company’s Class A common stock at a price of $11.50 per share, subject to certain adjustments. See Note 7.

NOTE 4. PRIVATE PLACEMENT UNITS

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 777,500 Private Units at a price of $10.00 per Private Unit (including 50,000 Private Units purchased in connection with the exercise of the underwriter’s over-allotment option). Each Private Unit is identical to the Public Units sold in the Initial Public Offering, except as described in Note 7. A portion of the proceeds from the sale of the Private Units were added to the net proceeds from the Initial Public Offering held in the Trust Account.

There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Founder Shares or the Private Shares, and the Private Warrants will expire worthless if the Company does not consummate a Business Combination within 24 months.


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NOTE 5. RELATED PARTY TRANSACTIONS

Founder Shares

In June 2020, the Sponsor purchased 4,312,500 shares of Class B common stock (the “Founder Shares”) for an aggregate purchase price of $25,000. On February 2, 2021, the Company effected a stock dividend of 0.15942029 of a share of Class B common stock for each outstanding share of Class B common stock, resulting in the Sponsor holding an aggregate of 5,000,000 Founder Shares. As a result of the underwriter’s election to fully exercise their over-allotment option, a total of 625,000 of Founder Shares are no longer subject to forfeiture.

The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any

30-trading

day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, or other similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Director Compensation

On February 5, 2021, the Company agreed to pay an aggregate of $375,000 in one-time cash bonus payments to its independent directors, which was recognized as general and administrative expense by the Company and included in formation costs and other operating expenses in the condensed statements of operations.

Administrative Support Agreement

The Company entered into an agreement dated as of February 2, 2021, pursuant to which the Company will pay Affinity Gaming, a Nevada corporation and affiliate of our sponsor, an aggregate monthly fee of $33,333 for office space, utilities, secretarial and administrative support services, and reimbursement of a portion of compensation paid by Affinity Gaming to the Company’s officers and reimbursement of expenses. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. The Company had incurred $266,664 of fees as of September 30, 2021.

Advances from Sponsor

On February 2, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $500,000. The Promissory Note is

non-interest

bearing and payable on the earlier of (i) June 30, 2021 or (ii) the consummation of the Initial Public Offering. On February 4, 2021, the outstanding balance of $71,706 in borrowings outstanding under the Promissory Note was repaid. There were no amounts outstanding under the Promissory Note as of September 30, 2021 and no further drawdowns are permitted.

Related Party Loans

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a Business Combination into Private Units at a price of $10.00 per Private Unit. To date, the Company had 0 outstanding borrowings under Working Capital Loans. There were no loans outstanding as of September 30, 2021 and December 31, 2020.

Related Party Consulting Agreement

The Company entered into an agreement dated as of October 28, 2021 (the “Consulting Agreement”), pursuant to which ZCG Consulting, an affiliate of the sponsor, will provide the Company with consulting services in connection with its search for a potential target company for a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination. Fees are expensed as incurred and are payable upon receipt. As of September 30, 2021, the Company had incurred $70,281 in fees under the Consulting Agreement which are recorded in accounts payable and accrued expenses on the condensed balance sheet.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Risks and Uncertainties

Management is continuing to evaluate the impact of the

COVID-19

pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


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Registration Rights

The holders of the Founder Shares, Private Units and units that may be issued upon conversion of working capital loans have registration rights pursuant to a registration rights agreement entered into on February 2, 2021 requiring the Company to register a sale of any of the Company’s securities held by them (in the case of the Founder Shares, only after conversion to the Company’s Class A common stock). These holders are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have certain “piggy-back” registration rights to include their securities in other registration statements filed by the Company.

Underwriting Agreements

The underwriters were paid a cash underwriting discount of 2.0% of the gross proceeds of the Initial Public Offering, or $4,000,000. The underwriter is entitled to a deferred fee of $0.35 per Public Unit, or $7,000,000 in the aggregate. The deferred commission was placed in the Trust Account and will be paid in cash upon the closing of a Business Combination, subject to the terms of the underwriting agreement.

NOTE 7. STOCKHOLDERS’ EQUITY

The Company is authorized to issue the following shares of capital stock, each with a par value of $0.0001 per share:

Class A Common Stock: 100,000,000 shares

Class B Common Stock: 10,000,000 shares

Preferred Stock: 1,000,000 shares

Preferred Stock

Shares of preferred stock may be issued from time to time in one or more series, with voting and other rights and preferences determined by the Company’s board of directors. At September 30, 2021, there were 0 shares of preferred stock issued or outstanding.

Class A and Class B Common Stock

Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, except as required by law.

Shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination on a

one-for-one

basis, subject to adjustment for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, and recapitalizations.

In the case that additional shares of Class A common stock, or

equity-linked

securities, are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an

as-converted

basis, 20% of the sum of (i) the total number of all shares of common stock outstanding upon completion of the Initial Public Offering plus (ii) the sum of (a) all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Business Combination (excluding (1) any shares or equity-linked securities issued, or to be issued, to any seller in the Business Combination, the Private Units and (2) any Private Units issued to the Sponsor or its affiliates upon conversion of loans made to us) minus (b) the number of Public Shares redeemed by Public Stockholders.

Pursuant to and concurrently with the Initial Public Offering, the Company sold 20,000,000 Public Units and 777,500 Private Units. At September 30, 2021, there were 777,500 shares of Class A common stock issued and outstanding, excluding 20,000,000 shares of Class A common stock subject to possible redemption (see Note 2), and 5,000,000 shares of Class B common stock issued and outstanding.


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Founder Shares and Private Shares

Holders of Founder Shares and Private Shares have the same stockholder rights as Public Stockholders except that:

•

Founder Shares and Private Shares are subject to certain transfer restrictions, as described in more detail below

•

The Initial Stockholders have agreed to

•

waive redemption rights with respect to Founder Shares, Private Shares, and any Public Shares held by them in connection with the completion of the initial Business Combination;

•

waive redemption rights with respect to Founder Shares, Private Shares, and any Public Shares held by them in connection with a stockholder vote to approve an amendment to the amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with the initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period or (B) with respect to any other provisions relating to stockholders’ rights or pre-initial Business Combination activity; and

•

waive their rights to liquidating distributions from the Trust Account with respect to Founder Shares if the Company fails to complete the initial Business Combination during the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold

•

Founder Shares are shares of Class B common stock that will automatically convert into shares of Class A common stock at the time of the initial Business Combination, or at any time prior thereto at the option of the holder, on a

one-for-one

basis, subject to certain adjustments

•

Are entitled to registration rights

Additionally, Founder Shares are subject to certain transfer restrictions as described in Note 5, and, prior to the initial Business Combination, only holders of the Founder Shares have the right to vote on the election of directors and holders of a majority of Founder Shares may remove a member of the board of directors for any reason.

With respect to any other matter submitted to a vote of stockholders, holders of Founder Shares and holders of Public Shares will vote together as a single class, with each share entitling the holder to one vote.

NOTE 8. WARRANT LIABILITIES

Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation. Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of (a) 12 months from the closing of the Initial Public Offering or (b) 30 days after the completion of a Business Combination. Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the units, and only whole Public Warrants will trade. The Public Warrants will expire five years from the completion of a Business Combination or earlier upon redemption or liquidation.

Once the Public Warrants become exercisable, the Company may redeem them (except as described for Private Warrants discussed below):

•

in whole and not in part;

•

at a price of $0.01 per Public Warrant;

•

upon a minimum of 30 days’ prior written notice of redemption; and

•

if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a

30-trading

day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Public Warrant holders equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like).


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The Private Warrants will be

non-redeemable

(except in certain instances) and exercisable on a cashless basis so long as they are held by our Sponsor or its permitted transferees. If the Private Units are held by someone other than our Sponsor or its permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants included in the Public Units being sold in this offering. If holders of Private Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their Private Warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the Private Warrants, multiplied by the difference between the exercise price of the Private Warrants and the “fair market value” by (y) the fair market value.

If, and only if, the last reported sale price of Class A common stock for any 20 trading days within a

30-trading

day period ending on the third trading day prior to the date on which the Company sends the notice of redemption equals or exceeds $10.00 per share, but is less than $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), the warrants may be redeemed at $0.10 per Public Warrant.

In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume- weighted average trading price of its Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company completes its Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Public Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.

The Company is not registering the shares of Class A common stock issuable upon exercise of the Public Warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of the Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants, and the Company will use its best efforts to cause the same to become effective within 60 business days after the closing of the initial Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Class A common stock until the Public Warrants expire or are redeemed, as specified in the warrant agreement; provided that if shares of Class A common stock are at the time of any exercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective by the 60th business day after the closing of the initial Business Combination, Public Warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise Public Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their Public Warrants on a cashless basis.

The Private Warrants are identical to the Public Warrants, except that the Private Warrants:

•

Will be

non-redeemable

•

May not, subject to certain limited exceptions, be transferred, assigned, or sold by the Sponsor until 30 days after the completion of the initial Business Combination (including the shares of Class A common stock issuable upon exercise of the Private Warrants)

•

May be exercised on a cashless basis, so long as they are held by the Sponsor or its permitted transferees


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NOTE 9. FAIR VALUE MEASUREMENTS

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:


Description	Level		September 30, 2021
Assets:
Marketable securities held in Trust Account		1	$	200,012,011
Liabilities:
Private Warrants		2	$	181,417
Public Warrants		1	$	4,666,667

As of December 31, 2020, there were

assets or liabilities that are measured at fair value on a recurring basis.

Warrants

The Warrants are accounted for as liabilities in accordance with ASC 815 and are

presented within warrant liabilities on the condensed balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations. Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the r

porting period in which a change in valuation technique or methodology occurs.

The Public Warrants and Private Warrants were initially valued using a Monte Carlo simulation model which is considered to be a Level 3 fair value measurement. The estimated fair value of Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement when the Public Warrants were separately listed and traded in an active market in April 2021. The estimated fair value of the Private Warrants were transferred from a Level 3 measurement to a Level 2 fair value measurement in July 2021. As the transfer of Private Warrants to anyone who is not a permitted transferee would result in the Private Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Warrant is equivalent to that of each Public Warrant.

As of September 30, 2021, the Private Warrants and Public Warrants were determined to be $0.70 per warrant for aggregate values of $0.2 million and $4.7 million, respectively.

The following table presents the changes in the fair value of warrant liabilities:


	Private			Public			Warrant Liabilities
Fair value as of December 31, 2020	$	0		$	0		$	0

Initial measurement on February 2, 2021		230,658			5,866,667			6,097,325
Change in valuation inputs or other assumptions (1)		(49,241	)		(1,200,000	)		(1,249,241	)

Fair value as of September 30, 2021	$	181,417		$	4,666,667		$	4,848,084

(1)	Changes in valuation inputs or other assumptions are recognized in change in fair value of warrant liabilities in the condensed statement of operations.

The following table presents the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value:


Fair value as of December 31, 2020	$	0
Initial measurement on February 2, 2021		6,097,325
Change in fair value		138,517

Fair value as of March 31, 2021		6,235,842
Transfer of Public Warrants to Level 1 measurement		(6,000,000	)
Change in fair value		41,466

Fair value as of June 30, 2021		277,308
Transfer of Private Warrants to Level 2 measurement		(277,308	)
Fair value as of September 30, 2021	$	0

NOTE 10. SUBSEQUENT EVENTS

Related Party Loans

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 a Business Combination, or, at the Sponsor’s discretion, up to $

1,500,000

of notes may be converted upon completion of a Business Combination into Private Units at a price of $

10.00

per Private Unit. There were

drawdowns on this note as of November

2021

Management has evaluated subsequent events to determine if events or transactions occurring through November 12, 2021, the date the unaudited condensed financial statements were issued, require potential adjustment to or disclosure in the unaudited condensed financial statements and has concluded that all such events that would require recognition or disclosure have been recognized or disclosed.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly Report”) 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. 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 the U.S. Securities and Exchange Commission (the “SEC”). 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 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 through September 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 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 gain due to a decrease 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 gain due to a decrease in fair value of warrant liabilities of 1,249,241.


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Liquidity and Capital Resources

On February 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 of September 30, 2021, we had marketable securities held in the Trust Account of $200,012,011 (including $12,011 of interest income) consisting of U.S. Treasury Bills with a maturity of 185 days or less.

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.

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, 2021, we had cash of $824,306 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 of September 30, 2021.


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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 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 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 in the 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 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.

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.


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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rules

13a-15

and

15d-15

under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules

13a-15

(e) and

15d-15

(e) under the Exchange Act) were effective as of September 30, 2021. Accordingly, management believes that the financial statements included in this Quarterly Report on Form

10-Q

present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2021 have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation of a Material Weakness in Internal Control over Financial Reporting

To remediate the material weakness in internal control related to the accounting classification for Warrants we issued in March 2021, which was brought to our attention only when the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”), dated April 12, 2021 (the “SEC Statement”), management made the following changes during 2021: the Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for the Warrants. The Company’s management has spent a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we already had processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have implemented changes to expand and enhance these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. These controls were initially put into place for the quarter ended June 30, 2021.


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Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC on February 2, 2021 and Form

10-Q

filed with the SEC on May 24, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.


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Table of Contents

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form

10-Q.


No.		Description of Exhibit

31.1*		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes— Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		.Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

101.CAL*		Inline XBRL Taxonomy Extension Schema.

101.SCH*		Inline XBRL Taxonomy Extension Calculation Linkbase.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase.

101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase.

104*		Cover Page Interactive Data File

*	Filed herewith.

These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.


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Table of Contents

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	GAMING & HOSPITALITY ACQUISITION CORP.

Date: November 12, 2021	By:	/s/ Mary Elizabeth Higgins
	Name: Title:	Mary Elizabeth Higgins Chief Executive Officer and Director Principal Executive Officer

Date: November 12, 2021	By:	/s/ Andrei Scrivens
	Name: Title:	Andrei Scrivens Chief Financial Officer Principal Financial and Accounting Officer


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Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. senior Bad

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company