Gaming & Hospitality Acquisition Corp. - Quarter Report: 2022 March (Form 10-Q)

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

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

Delaware		84-5014306
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
3755 Breakthrough Way #300 Las Vegas, Nevada		89135
(Address of principal executive offices)		(Zip Code)

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

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

		March 31, 2022				December 31, 2021
		(Unaudited)
ASSETS
Current assets
Cash		$	1,026,203			$	371,678
Prepaid expenses			586,480				683,197
Total current assets			1,612,683				1,054,875
Investments held in Trust Account			200,034,244				200,016,053
Total assets		$	201,646,927			$	201,070,928
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued expenses		$	950,821			$	1,277,271
Accounts payable – related party			—				33,333
Convertible promissory note – related party			1,500,000				—
Total current liabilities			2,450,821				1,310,604
Warrant liabilities			1,869,975				4,155,500
Deferred underwriting fee payable			7,000,000				7,000,000
Total liabilities			11,320,796				12,466,104
Commitments and contingencies
Class A common stock subject to possible redemption, $0.0001 par value, 20,000,000 shares issued and outstanding, at March 31, 2022 and December 31, 2021, respectively, at redemption value of $10.00 per share			200,000,000				200,000,000
Stockholders’ deficit
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none outstanding			—				—
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 777,500 shares issued and outstanding (excluding 20,000,000 shares subject to possible redemption), at March 31, 2022 and December 31, 2021, respectively			78				78
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			—				—
Accumulated deficit			(9,674,447	)			(11,395,754	)
Total stockholders’ deficit			(9,673,869	)			(11,395,176	)
Total liabilities and stockholders’ deficit		$	201,646,927			$	201,070,928

		Three Months Ended				Three Months Ended
		March 31, 2022				March 31, 2021
Formation costs and other operating expenses		$	582,409			$	624,035
Other income (expense):
Interest income on marketable securities held in Trust Account			18,191				2,660
Transaction costs allocable to warrant liability			—				(344,981	)
Change in fair value of warrant liabilities			2,285,525				(138,517	)
Other income (expense), net			2,303,716				(480,838	)
Net income (loss)		$	1,721,307			$	(1,104,873	)
Weighted average number of common shares outstanding:
Class A - Public shares			20,000,000				12,359,551
Class A - Private shares			777,500				480,478
Class B - Common stock			5,000,000				4,756,944
Basic and diluted net income (loss) per share:
Class A - Public shares		$	0.07			$	(0.06	)
Class A - Private shares		$	0.07			$	(0.06	)
Class B - Common stock		$	0.07			$	(0.06	)

		Class A								Class B								Additional Paid-in Capital				Accumulated Deficit				Total Stockholders’ Deficit
		Common Stock								Common Stock
		Shares				Amount				Shares				Amount
Balance—December 31, 2021			777,500			$	78				5,000,000			$	500			$	—			$	(11,395,754	)		$	(11,395,176	)
Net income			—				—												—				1,721,307				1,721,307
Balance – March 31, 2022			777,500			$	78				5,000,000			$	500			$	—			$	(9,674,447	)		$	(9,673,869	)

		Class A								Class B								Additional Paid-in Capital				Accumulated Deficit				Total Stockholders’ Equity (Deficit)
		Common Stock								Common Stock
		Shares				Amount				Shares				Amount
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				—				—				7,544,264				—				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			777,500			$	78				5,000,000			$	500			$	—			$	(10,824,475	)		$	(10,823,897	)

		Three Months Ended				Three Months Ended
		March 31, 2022				March 31, 2021
Cash flow from operating activities:
Net income (loss)		$	1,721,307			$	(1,104,873	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Interest income earned on marketable securities held in Trust Account			(18,191	)			(2,660	)
Change in fair value of warrant liabilities			(2,285,525	)			138,517
Transaction costs allocable to warrant liabilities			—				344,981
Changes in operating assets and liabilities
Prepaid expenses			96,717				(996,297	)
Accounts payable and accrued expenses			(326,450	)			40,829
Accounts payable – related party			(33,333	)			66,666
Net cash used in operating activities			(845,475	)			(1,512,837	)
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	)
Proceeds from convertible promissory note – related party			1,500,000				—
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			1,500,000				203,019,269
Net change in cash			654,525				1,506,432
Cash at the beginning of the period			371,678				25,000
Cash at the end of the period		$	1,026,203			$	1,531,432
Supplemental disclosure of non-cash activities:
Deferred underwriting fees payable		$	—			$	7,000,000

		For the three months ended March 31, 2022												For the three months ended March 31, 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)		$	1,335,511			$	51,918			$	333,878			$	(776,028	)		$	(30,168	)		$	(298,677	)
Denominator:
Basic and diluted weighted average shares outstanding			20,000,000				777,500				5,000,000				12,359,551				480,478				4,756,944
Basic and diluted net income (loss) per common stock		$	0.07			$	0.07			$	0.07			$	(0.06	)		$	(0.06	)		$	(0.06	)

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

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 assessment of the assumptions that market participants would use in pricing the asset or liability.

•

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 .

•

Holders of Founder Shares and Private Shares are entitled to registration rights.

•

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).

•

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

Description		Level				March 31, 2022				December 31, 2021
Assets:
Marketable securities held in Trust Account			1			$	200,034,244			$	200,016,053
Liabilities:
Private Warrants			2			$	69,975			$	155,500
Public Warrants			1			$	1,800,000			$	4,000,000

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.

non-operating

For the three months ended March 31, 2022, we had net income of $1,721,307, which consisted of operating costs of $582,409, interest income on marketable securities held in our Trust Account of $18,191, and a gain due to a decrease in fair value of warrant liabilities of 2,285,525.

For the three months ended March 31, 2021, we had a net loss of $1,104,873, which consisted of operating costs of $624,035, interest income on marketable securities held in our Trust Account of $2,660, transaction costs allocable to warrant liability of $344,981, and a loss due to an increase in fair value of warrant liabilities of 138,517.

 

17

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 March 31, 2022, we had marketable securities held in the Trust Account of $200,034,244 (including $34,244 of interest income), consisting of investments in qualifying money market funds that invest solely in U.S. treasury securities.

For the three months ended March 31, 2022, cash used in operating activities was $845,475. Net income of $1,721,307 was affected by interest income on marketable securities held in our Trust Account of $18,191, change in fair value of warrant liabilities of $2,285,525, and changes in operating assets and liabilities, which used $(263,066) of cash.

For the three months ended March 31, 2021, cash used in operating activities was $1,512,837. Net loss of $1,104,873 was affected by interest income on marketable securities held in our Trust Account of $2,660, transaction costs allocable to warrant liabilities of $344,981, change in fair value of warrant liabilities of $138,517, and changes in operating assets and liabilities, which used $888,802 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 March 31, 2022, we had cash of $1,026,203 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.

non-interest

in-depth

 

18

Sheet Arrangements

off-balance

non-interest

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.

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

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.

 

19

Non-redeemable

paid-in

non-cash

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.

12b-2

13a-15

15d-15

13a-15

15d-15

10-Q

We have improved and will continue to improve our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

Additionally, this material weakness could result in a misstatement of complex financial instruments and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis.

 

20

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.

Other than as described herein, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

To remediate the material weakness in internal control related identified above, we have improved and will continue to improve our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. This is in addition to the remediation relating 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”), in view of which 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.

 

21

None.

10-Q,

10-K.

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.

Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial Business Combination and results of operations.

On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in Business Combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed Business Combination transactions; increasing the potential liability of certain participants in proposed Business Combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our ability to negotiate and complete our initial Business Combination and may increase the costs and time related thereto.

None.

None.

Not applicable.

None.

 

22

10-Q.

 

 

 

23

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.

 

 

 

24