GOLDEN NUGGET ONLINE GAMING, INC. Discussion and analysis of the financial situation and the operating result by the management. (Form 10-Q)

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The following discussion of our financial condition and results of operations
should be read in conjunction with our audited financial statements, and the
notes thereto included in our Annual Report on Form 10-K/A for the year ended
December 31, 2020, filed with the SEC.

The following discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results and the timing of events may differ
materially from those expressed or implied in such forward- looking statements
as a result of various factors, including those set forth in "Cautionary Note
Regarding Forward-Looking Statements" included herein and "Risk Factors"
included in this Quarterly Report on Form 10-Q and our Annual Report on Form
10-K/A for the year ended December 31, 2020, filed with the SEC.

overview

Golden Nugget Online Gaming, Inc. (formerly known as Landcadia Holdings II, Inc.
or "GNOG", the "Company", "we", "our" or "us") is an online gaming, or iGaming,
and digital sports entertainment company focused on providing our customers with
the most enjoyable, realistic and exciting online gaming experience in the
market. We currently operate in New Jersey, Michigan and West Virginia where we
offer patrons the ability to play their favorite casino games and bet on
live-action sports events, and in Virginia, where we offer online sports betting
only.

We operate as an umbrella partnership C-corporation, or "Up-C," meaning that
substantially all of our assets are held indirectly through Golden Nugget Online
Gaming LLC ("GNOG LLC"), our indirect subsidiary, and our business is conducted
through GNOG LLC.

Acquisition Transaction

As of May 9, 2019, we were a blank check company formed under the laws of the
State of Delaware 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. On December 29, 2020, we completed the
Acquisition Transaction and changed our name to Golden Nugget Online
Gaming, Inc. The Acquisition Transaction was accounted for as a reverse
recapitalization and the reported amounts from operations prior to the
Acquisition Transaction are those of GNOG LLC. (See Note 3 in the Notes to the
Consolidated Financial Statements).

The historical financial information of Landcadia Holdings II, Inc. (a special
purpose acquisition company, or "SPAC") prior to the closing of the Acquisition
Transaction has not been reflected in the financial statements as these
historical amounts have been determined to be not useful information to a user
of our financial statements. SPACs deposit the proceeds from their initial
public offerings into a segregated trust account until a business combination
occurs, where such funds are then used to pay consideration for the acquiree
and/or to pay stockholders who elect to redeem their shares of common stock in
connection with the business combination. The operations of a SPAC, until the
closing of a business combination, other than income from the trust account
investments and transaction expenses, are nominal. Accordingly, no other
activity in the Company was reported for periods prior to December 29, 2020
besides GNOG LLC's operations.

DraftKings merger



On August 9, 2021, the Company,  DraftKings Inc., a Nevada corporation
("DraftKings"), New Duke Holdco, Inc., a Nevada corporation and a wholly owned
subsidiary of DraftKings ("New DraftKings"), Duke Merger Sub, Inc., a Nevada
corporation and a wholly owned subsidiary of New DraftKings ("Duke Merger Sub"),
and Gulf Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary
of New DraftKings ("Gulf Merger Sub" and, together with Duke Merger Sub, the
"Merger Subs"), entered into an agreement and plan of merger (the "Merger
Agreement"), pursuant to which DraftKings will, among other things, acquire all
of the Company's issued and outstanding shares of common stock (the "GNOG
Shares").  The transactions contemplated by the Merger Agreement and the other
related transactions are referred to herein as the "DraftKings Merger".



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On the terms and subject to the conditions set forth in the Merger Agreement,
(a) at the Duke Effective Time (as defined in the Merger Agreement), Duke Merger
Sub will be merged with and into DraftKings in accordance with the Nevada
Revised Statutes (the "NRS"), with DraftKings becoming the surviving corporation
(the "Duke Surviving Corporation") and (b) at the Gulf Effective Time (as
defined in the Merger Agreement), Gulf Merger Sub will be merged with and into
the Company in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), with the Company becoming the surviving corporation (the
"Gulf Surviving Corporation", and together with the Duke Surviving Corporation,
collectively the "Surviving Corporations"). In connection with the DraftKings
Merger, certain affiliates of Tilman Fertitta will consummate certain
reorganization transactions to allow Landcadia HoldCo, LLC to become a
wholly-owned subsidiary of the Company following the consummation of the
DraftKings Merger.



The Merger Agreement provides that upon the consummation of the DraftKings
Merger, each holder of GNOG Shares (each, a "GNOG Shareholder") will receive
0.365 (the "Exchange Ratio") of a share of New DraftKings Class A common stock
(the "New DraftKings Class A Common Stock") for each GNOG Share issued and
outstanding immediately prior to the Gulf Effective Time, other than any
Excluded Shares (as defined in the Merger Agreement).



Each share of DraftKings Class A common stock ("DraftKings Class A Common
Stock") issued and outstanding immediately prior to the Duke Effective Time
(other than excluded shares) will be cancelled, cease to exist and be converted
into one validly issued, fully paid and non-assessable share of New DraftKings
Class A Common Stock and each share of DraftKings Class B common stock issued
and outstanding immediately prior to the Duke Effective Time (other than
excluded shares) shall be converted into one validly issued, fully paid and
non-assessable share of New DraftKings Class B common stock.



At the Gulf Effective Time, each outstanding restricted stock unit (a "GNOG
RSU") issued by the Company that (i) were outstanding on the date of the Merger
Agreement or (ii) are issued to existing employees of the Company prior to the
completion of the DraftKings Merger in accordance with existing agreements, will
vest, be cancelled, and entitle the holder thereof to receive a number of shares
of New DraftKings Class A Common Stock equal to the number of shares of the
Company's common stock subject to such GNOG RSU immediately prior to the Gulf
Effective Time multiplied by the Exchange Ratio, less a number of shares of New
DraftKings Class A Common Stock equal to any applicable withholding taxes. All
other issued and outstanding GNOG RSUs will be automatically converted into an
equivalent restricted stock unit of New DraftKings that entitles the holder
thereof to a number of shares of New DraftKings Class A Common Stock equal to
the number of shares of the Company's common stock subject to such GNOG RSU
immediately prior to the Gulf Effective Time multiplied by the Exchange Ratio,
and will remain outstanding in New DraftKings.



At the Gulf Effective Time, each outstanding warrant issued by the Company
("Private Placement Warrant") to purchase shares of the Company's Class A common
stock ("GNOG Class A Common Stock") will automatically and without any required
action on the part of the holder convert into a warrant to purchase a number of
New DraftKings Class A Common Stock equal to the product of (x) the number of
shares of GNOG Class A Common Stock subject to such Private Placement Warrant
immediately prior to the Gulf Effective Time multiplied by (y) the Exchange
Ratio, and the exercise price of such Private Placement Warrant will be
determined by dividing (1) the per share exercise price of such Private
Placement Warrant immediately prior to the Gulf Effective Time by (2) the
Exchange Ratio.



The DraftKings Merger is expected to constitute a tax deferred transaction for the Company’s shareholders and warrant holders and the completion of the DraftKings Merger is contingent upon receipt of an appropriate tax opinion.



The DraftKings Merger is expected to close in the first quarter of 2022, subject
to the satisfaction or waiver of certain conditions, including, among others,
(i) the absence of certain legal restraints that would prohibit or seek to
prohibit DraftKings Merger; (ii) the receipt of certain regulatory approvals;
(iii) the approval for listing on Nasdaq of the shares of New DraftKings Class A
Common Stock to be issued to DraftKings stockholders and the Company's
stockholders; (iv) the Commercial Agreement (as defined in the Merger Agreement)
being in full force and effect; (v) the absence, since the date of the Merger
Agreement, of any effect, event, development, change, state of facts, condition,
circumstance or occurrence that, individually or in the aggregate, has had or
would reasonably be expected to have a material adverse effect on the Company or
DraftKings; and (vi) the Registration Statement on Form S-4 becoming effective
in accordance with the provisions of the Securities Act of 1933 as amended
(the
"Securities Act").



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Related Agreements


Concurrently with the execution of the Merger Agreement, DraftKings entered into
a support and registration rights agreement (the "Support Agreement") with New
DraftKings, Tilman J. Fertitta ("Fertitta"), Fertitta Entertainment, Inc., a
Texas corporation ("FEI"), Landry's Fertitta, LLC, a Texas limited liability
company ("Landry's Fertitta"), Golden Landry's LLC, a Texas limited liability
company ("Golden Landry's") and Golden Fertitta, LLC, a Texas limited liability
company ("Golden Fertitta" and together with Fertitta, FEI, Landry's Fertitta
and Golden Landry's, the "Fertitta Parties"), pursuant to which the Fertitta
Parties agreed (i) not to transfer the New DraftKings Class A Common Stock that
the Fertitta Parties will receive in the DraftKings Merger prior to the first
anniversary of the closing of the DraftKings Merger and (ii) from the date of
the Support Agreement to the five-year anniversary of the closing of the
DraftKings Merger, not to engage in a Competing Business (as defined in the
Support Agreement). New DraftKings agreed to provide the Fertitta Parties with
shelf registration rights with respect to New DraftKings Class A Common Stock
and warrants to purchase New DraftKings Class A Common Stock that the Fertitta
Parties will receive in connection with the DraftKings Merger. In addition, the
Fertitta Parties have agreed to execute (and cause its affiliates to execute)
all such agreements and take such action as required to waive the obligations of
all Fertitta Parties to make interest payments on behalf of the Company and of
the Company to issue equity in relation to such payments.




COVID-19

During March 2020, a global pandemic was declared by the World Health
Organization related to the rapidly growing outbreak of a novel strain of
coronavirus (COVID-19). The pandemic has significantly impacted the economic
conditions around the world, accelerating during the last half of March 2020, as
federal, state and local governments react to the public health crisis. The
direct impact on us has been primarily through an increase in new patrons
utilizing online gaming due to closures of land-based casinos and suspensions,
postponement and cancellations of major sports seasons and sporting events,
although sports betting accounted for less than 1% of our revenues for 2020.
Land based casinos reopened in July 2020 with significant restrictions, which
eased over time. However, virus cases began to increase in the fall and winter
of 2020 and capacity restrictions were reinstituted. During 2021 there has been
additional concerns regarding COVID-19 variants; as a result, the ultimate
impact of this pandemic on our financial and operating results is unknown and
will depend, in part, on the length of time that these disruptions exist and the
subsequent behavior of new patrons after land-based casinos reopen fully.

A significant or prolonged decrease in consumer spending on entertainment or
leisure activities could have an adverse effect on the demand for the Company's
product offerings, reducing cash flows and revenues, and thereby materially
harming the Company's business, financial condition and results of operations.
In addition, a recurrence of COVID-19 cases or an emergence of additional
variants or strains could cause other widespread or more severe impacts
depending on where infection rates are highest. As steps taken to mitigate the
spread of COVID-19 have necessitated a shift away from a traditional office
environment for many employees, the Company has business continuity programs in
place to ensure that employees are safe and that the business continues to
function with minimal disruptions to normal work operations while employees work
remotely. The Company will continue to monitor developments relating to
disruptions and uncertainties caused by COVID-19.

Components of our earnings situation

Our earnings

Revenues.

Gaming. We earn revenues primarily through online real money gaming, offering a
suite of games similar to those available in land-based casinos, as well as
online sports wagering. Similar to land-based casinos, the revenue recognized is
the aggregate net difference between gaming wins and losses. We record accruals
related to the incremental anticipated payouts of progressive jackpots as the
progressive game is played. Free play and other incentives to customers are
recorded as a reduction of gaming revenue.

Other. We have entered into contracts to manage multi-year market access
agreements entered into with other online betting operators that are authorized
to operate online casino and online sports wagering. We receive royalties from
the online betting operators and reimbursements for costs incurred. Initial fees
received for the market access

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Agreements and pre-paid guaranteed minimum license fees are deferred and recorded over the term of the contract with the fulfillment of the performance obligations.

We have entered into contracts to manage multi-year live dealer studio broadcast
license agreements with online casino operators that provide for the use of the
live table games that are broadcast from our studio at the Golden Nugget in
Atlantic City, New Jersey. We receive royalties from the online casino operators
based on a percentage of GGR. We also offer some "private tables" for which we
receive a flat monthly fee in addition to a percentage of GGR.

Our operating costs and expenses

Cost of Revenue. Cost of revenue includes the gaming taxes that are imposed by
the jurisdictions in which we operate, fees paid to platform and content
providers, market access and license fees, brand royalties, payment processing
fees and related chargebacks, labor and other related costs associated with our
live dealer studio and other reimbursable costs incurred.

Advertising and Promotion. Advertising and promotion expense includes costs
associated with marketing our product offerings and other related costs incurred
to acquire new customers. We use a variety of advertising channels to optimize
our marketing spend based on performance and the highest possible returns.

General and administrative. General administrative costs include administrative staff costs, fees related to legal, auditing and other consulting expenses, share-based payments and insurance costs.

Results of Operations




                         Three Months Ended September 30,                      Nine Months Ended September 30,
                    2021         2020       $Change      % Change         2021         2020       $Change      % Change
Revenues
Gaming            $  31,792    $ 22,938    $    8,854        38.6 %    $   82,886    $ 59,890    $   22,996        38.4 %
Other                 3,846       2,990           856        28.6 %        11,192       8,201         2,991        36.5 %
Total revenue        35,638      25,928         9,710        37.4 %       
94,078      68,091        25,987        38.2 %
Costs and
expenses
Cost of
revenue              17,007      10,241         6,766        66.1 %        43,868      26,930        16,938        62.9 %
Advertising
and promotion        16,618       5,284        11,334       214.5 %        47,496      12,870        34,626       269.0 %
General and
administrative
expense               7,858       2,187         5,671       259.3 %        21,260       5,648        15,612       276.4 %
Merger related
expenses              2,763           -         2,763                       2,763           -         2,763
Depreciation
and
amortization             76          55            21        38.2 %           160         138            22        15.9 %
Total costs
and expenses         44,322      17,767        26,555       149.5 %       115,547      45,586        69,961       153.5 %
Operating
income (loss)       (8,684)       8,161      (16,845)     (206.4) %      (21,469)      22,505      (43,974)     (195.4) %
Other expense
(income)
Interest
expense, net          5,180      11,311       (6,131)      (54.2) %        15,983      19,077       (3,094)      (16.2) %


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                           Three Months Ended September 30,                

Nine months over 30. September,

                      2021         2020        $Change      % Change         2021         2020        $Change      % Change
Loss (gain) on
warrant
derivatives            18,944            -        18,944         n/a        (71,031)            -      (71,031)         n/a
Other expense
(income)                (101)            -         (101)         n/a             331            -           331         n/a
Total other
expense
(income)               24,023       11,311        12,712       112.4 %      (54,717)       19,077      (73,794)     (386.8) %
Income (loss)
before income
taxes                (32,707)      (3,150)      (29,557)       938.3 %        33,248        3,428        29,820       869.9 %
Provision for
income taxes          (1,361)      (1,376)            15       (1.1) %       (3,477)          914       (4,391)     (480.4) %
Net income
(loss)               (31,346)      (1,774)      (29,572)     1,667.0 %        36,725        2,514        34,211     1,360.8 %
Net loss
attributable to
non-controlling
interests               5,590            -         5,590         n/a          16,126            -        16,126         n/a
Net income
(loss)
attributable to
GNOG               $ (25,756)    $ (1,774)    $ (23,982)     1,351.9 %    $
  52,851    $   2,514    $   50,337     2,002.3 %



Three months ended September 30, 2021 Compared to three months over
September 30, 2020

Revenues.

Gaming. Gaming revenues increased $8.9 million, or 38.6%, to $31.8 million from
$22.9 million for the three months ended September 30, 2021 compared to the
three months ended September 30, 2020. The increase was primarily the result of
the impact of our launch in Michigan in late January of 2021. We also commenced
operations in West Virginia and Virginia late in the third quarter.

Other. Other revenues increased $0.9 million, or 28.6%, to $3.9 million from
$3.0 million for the three months ended September 30, 2021 compared to the three
months ended September 30, 2020. Market access and live dealer studio broadcast
revenues increased $0.6 million, or 27.5%, as royalties with existing partners
increased and the addition of a new partner when compared to the prior year
period. Reimbursable revenues under these arrangements also increased by $0.2
million, or 32.5%.

Operating costs and expenses.

Cost of revenue. Cost of revenue increased $6.8 million, or 66.1%, for the three
months ended September 30, 2021 compared to the prior year comparable period as
a result of the increase in gaming revenue for the third quarter. Increased
gaming taxes and market access fees associated with our launch in Michigan in
late January 2021 increased cost of revenue for the three months ended
September 30, 2021 compared to the three months ended September 30, 2020.

Advertising and promotion. Advertising and promotion expenses increased $11.3
million, or 214.5%, to $16.6 million from $5.3 million for the three months
ended September 30, 2021 compared to the three months ended September 30, 2020.
This increase from the prior year comparable period is almost entirely
attributable to our launch in the Michigan market in late January 2021.

General and administrative. General administrative costs increased $ 5.7 million, or 259.3% $ 7.9 million from $ 2.2 million for the same period of the previous year. This increase is essentially stock-based

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compensation of $3.4 million during the three months ended September 30, 2021,
whereas there was no stock-based compensation expense in the prior year.
Compensation expense is also higher than the prior year period and professional
fees for audit services, tax services, legal services and other costs associated
with being a public company are up significantly over the prior year period.

Merger related expenses. Merger related expenses amounted to $2.8 million for
the three months ended September 30, 2021 and related primarily to regulatory,
legal and other professional fees incurred in connection with the DraftKings
Merger. There were no merger related expenses incurred in the prior year
comparable period.

Interest expense. Interest expense for the three months ended September 30, 2021
was $5.2 million as compared to $11.3 million for the three months ended
September 30, 2020. The decrease is the result of the repayment of $150.0
million of the principal balance of the $300.0 term loan in connection with the
December 29, 2020 closing of the Acquisition Transaction and the repayment of an
additional $10.6 million in February of 2021.

Loss (gain) on warrant derivatives. In accordance with ASC 815-40, we classify
our warrants as derivative liabilities measured at fair value, with changes in
fair value each period reported in earnings. The loss on warrant derivatives
during the three months ended September 30, 2021 amounted to $18.9 million and
no such gains or losses were recognized for the three months ended September 30,
2020.

Provision for Income Taxes. The provision for income taxes was a benefit of $1.4
million for the three months ended September 30, 2021 compared to a benefit of
$1.4 million for the comparable prior year quarter. The effective tax rate was
4.2% for the three months ended September 30, 2021 as compared to 43.7% for the
three months ended September 30, 2020. This decrease in the effective tax rate
is primarily a result of the loss on the warrant derivative of $18.9 million and
the loss attributable to the non-controlling interest for the three months ended
September 30, 2021, which are not subject to federal or state income tax in our
consolidated statements of operations.

Net loss attributable to non-controlling interests. Net loss attributable to
non-controlling interests represents a 40.5% economic interest in the losses
from GNOG LLC for the three months ended September 30, 2021. The non-controlling
interests consist of the Class B Units in Landcadia Holdco held by LF LLC that
have no voting rights and that are redeemable, together with an equal number of
Class B common stock, for either 31,657,545 shares of Class A common stock or an
equal value of cash, at our election.

Nine months over September 30, 2021 Compared to Nine Months Over September 30, 2020

Revenues.

Gaming. Gaming revenues increased $23.0 million, or 38.4%, to $82.9 million from
$59.9 million for the nine months ended September 30, 2021 compared to the nine
months ended September 30, 2020. The increase was primarily the result of the
impact of our launch in Michigan in late January of 2021. We also commenced
operations in West Virginia and Virginia late in the third quarter.

Other. Other revenues increased $3.0 million, or 36.5%, to $11.2 million from
$8.2 million for the nine months ended September 30, 2021 compared to the nine
months ended September 30, 2020. Market access and live dealer studio broadcast
revenues increased $2.3 million, or 37.2%, as royalties with existing partners
increased and the addition of a new partner when compared to the prior year
period. Reimbursable revenues under these arrangements also increased by $0.6
million, or 34.2%.

Operating costs and expenses.

Cost of revenue. Cost of revenue increased $16.9 million, or 62.9%, for the nine
months ended September 30, 2021 compared to the prior year comparable period as
a result of the increase in gaming revenue for the period. Increased gaming
taxes and market access fees associated with our launch in Michigan in late
January 2021 and brand royalty expense paid to an affiliate which began in
May 2020 also increased cost of revenue for the nine months ended September 30,
2021 compared to the nine months ended September 30, 2020.

Advertising and promotion. Advertising and promotional expenses increased $ 34.6 million, or 269.0% $ 47.5 million from $ 12.9 million for the nine months to end September 30, 2021 compared to the nine months ended

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September 30, 2020. This increase over the same period last year is almost entirely due to our introduction in the Michigan Market late
January 2021.

General and administrative. General and administrative expenses increased $15.6
million, or 276.4%, to $21.3 million from $5.6 million for the prior year
comparable period. This increase is due largely to stock-based compensation of
$8.7 million during the nine months ended September 30, 2021, whereas there was
no stock-based compensation expense in the prior year period. Compensation
expense is also higher than the prior year period and professional fees for
audit services, tax services, legal services and other costs associated with
being a public company are up significantly over the prior year period.

Merger related expenses. Merger related expenses amounted to $2.8 million for
the nine months ended September 30, 2021 and related primarily to regulatory,
legal and other professional fees incurred in connection with the DraftKings
Merger. There were no merger related expenses incurred in the prior year
comparable period.

Interest expense. Interest expense for the nine months ended September 30, 2021
was $16.0 million as compared to $19.1 million. We entered into a $300.0 million
term loan credit agreement on April 28, 2020. We repaid $150.0 principal balance
of the term loan in connection with the December 29, 2020 closing of the
Acquisition Transaction and repaid an additional $10.6 million in February of
2021. In connection with this repayment during the nine months ended September
30, 2021, we expensed $0.6 million in unamortized discount and loan origination
costs as interest expense.

Gain on warrant derivatives. In accordance with ASC 815-40, we classify our
warrants as derivative liabilities measured at fair value, with changes in fair
value each period reported in earnings. The gain on warrant derivatives during
the nine months ended September 30, 2021 amounted to $71.0 million and no such
gains were recognized for the nine months ended September 30, 2020.

Other expense. Other expense consists of prepayment premiums associated with the
repayment of $10.6 million principal amount of our term loan during the nine
months ended September 30, 2021, partially offset by non-cash gains on the tax
receivable agreement during the period.

Provision for income taxes. The provision for income taxes was a benefit of $3.5
million for the nine months ended September 30, 2021 compared to tax expense of
$0.9 million for the comparable prior year quarter. This decrease of $4.4
million for the nine months ended September 30, 2021 compared to the nine months
ended September 30, 2020, is primarily a result of pre-tax losses for the period
as the gain on the warrant derivative of $71.0 million and the loss attributable
to the non-controlling interest for the nine months ended September 30, 2021,
are not subject to federal or state income tax in our consolidated statements of
operations.

Net loss attributable to non-controlling interests. Net loss attributable to
non-controlling interests represents an average 41.4% economic interest in the
losses from GNOG LLC for the nine months ended September 30, 2021. The
non-controlling interests consist of the Class B Units in Landcadia Holdco held
by LF LLC that have no voting rights and that are redeemable, together with an
equal number of Class B common stock, for either 31,657,545 shares of Class A
common stock or an equal value of cash, at our election.

Liquidity and capital resources

We measure liquidity in terms of our ability to fund the cash requirements of
our business operations, including working capital and capital expenditure
needs, contractual obligations and other commitments, with cash flows from
operations and other sources of funding. Our current working capital needs
relate mainly to launching our iGaming and sports wagering product offerings in
new markets, as well as compensation and benefits for our employees. Our ability
to expand and grow our business will depend on many factors, including working
capital needs and the evolution of our operating cash flows.

Further expansion into new markets will likely require additional capital either
from affiliates or third parties and based on our financial performance, we
believe we will have access to that capital. The future economic environment,
however, could limit our ability to raise capital by issuing new equity or debt
securities on acceptable terms or at all, and lenders may be unwilling to lend
funds on acceptable terms or at all in the amounts that would be required to
supplement cash flows to support our expansion plans. The sale of additional
equity investments or convertible debt securities would result in dilution to
our stockholders and may not be available on favorable terms

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or at all, particularly in light of the current conditions in the financial and
credit markets. Additional debt would result in increased expenses and would
likely impose new restrictive covenants which may be similar or different than
those restrictions contained in the covenants under our current Credit
Agreement.

Credit Agreement. On April 28, 2020, we entered into a term loan credit
agreement that is guaranteed by the parent of Old GNOG, comprised of a
$300.0 million interest only term loan due October 4, 2023. Net proceeds
received from the term loan of $288.0, net of original issue discount, were sent
to the parent of Old GNOG, who issued Old GNOG a note receivable due
October 2024 (as amended and restated following the Acquisition Transaction, the
"Second A&R Intercompany Note") (Note 10) in the same amount, with substantially
similar terms as the credit agreement. The Second A&R Intercompany Note was
accounted for as contra-equity, similar to a subscription receivable, however in
the reverse recapitalization recorded in connection with the Acquisition
Transaction, Second A&R Intercompany Note was accounted for as a distribution to
the parent of Old GNOG, reducing retained earnings. The term loan was issued at
a 4% discount. The term loan bears interest at the London Interbank Offered Rate
("LIBOR") plus 12%, with a 1% floor, and interest payments are made quarterly.
The term loan is secured Second A&R Intercompany Note which effectively, but
indirectly provides pari passu security interest with the Golden Nugget, LLC
senior secured credit facility.

In February 2021, we repaid $10.6 million of the term loan and incurred a
prepayment premium of $1.6 million which was expensed as other expense in our
consolidated statement of operations. Additionally, we expensed $0.2 million in
deferred debt issuance costs and $0.4 million in unamortized debt discount as
interest expense in our consolidated statement of operations for the nine months
ended September 30, 2021.

In connection with the Acquisition Transaction, we repaid $150.0 million of the
$300.0 million term loan and incurred a prepayment premium of $24.0 million,
which along with other related fees and expenses was expensed as other expense
in our consolidated statement of operations. Additionally, we expensed $3.3
million in deferred debt issuance costs and $5.0 million in unamortized discount
as interest expense in our consolidated statement of operations for the year
ended December 31, 2020.

The term loan credit agreement contains certain negative covenants including
restrictions on incurring additional indebtedness or liens, liquidation or
dissolution, limitations on disposal of assets and paying dividends. The term
loan credit agreement also contains a make-whole provision that is in effect
through April 2022. The prepayment premium under the make-whole provision is
calculated as (A) the present value of (i) 100% of the aggregate principal
amount of the term loan prepaid, plus (ii) all required remaining scheduled
interest payments through April 2022, minus (B) the outstanding principal amount
being prepaid.

Outlook. Considering that we have cash and cash equivalents of $134.4 million at
September 30, 2021 and based on our current level of operations in New Jersey,
we believe that cash on hand and cash generated from our New Jersey operations
will be adequate to meet our anticipated obligations under our contracts, debt
service requirements, capital expenditures and working capital needs for the
next twelve months. However, we cannot be certain that our business will
generate sufficient cash flow from operations; that the U.S. economy will
continue to grow in 2021 and beyond; that our anticipated earnings projections
will be realized; or that future equity offerings or borrowings will be
available in the capital markets to enable us to service our indebtedness or to
make anticipated advertising expenditures. If we expand our business into new
markets in the future, our cash requirements may increase significantly and we
may need to complete equity or debt financings to meet these requirements. Our
future operating performance and our ability to service or refinance our debt
will be subject to future economic conditions and to financial, business and
other factors, many of which are beyond our control.

Cash Flows. Net cash used by operating activities was $29.5 million for the nine
months ended September 30, 2021 compared to $24.4 million provided by operating
activities for the nine months ended September 30, 2020. Factors affecting
changes in operating cash flows are similar to those that impact net income,
with the exception of non-cash items such as gains on warrant derivatives,
stock-based compensation, gains on tax receivable agreement liability,
amortization of debt issuance costs and discounts, depreciation and amortization
and deferred taxes. Additionally, changes in working capital items such as
accounts receivable, accounts payable, accrued liabilities, other assets and
customer deposits can significantly affect operating cash flows. Cash flows used
by operating activities during the nine months ended September 30, 2021 were
higher as a result of net income of $36.7 million for the nine months ended
September 30, 2021 being reduced by non-cash items totaling $62.8 million as
compared to net income of $2.5 million for the nine months ended September 30,
2020 being decreased by non-cash items totaling $0.6 million. Working capital
fluctuations further increased cash used in operating activities by $3.4 million

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for the nine months ended September 30, 2021, most notably the increase in other
assets, compared to cash provided by working capital fluctuations of $22.5 for
the nine months ended September 30, 2020.

The outflow of funds from investing activities was $ 0.6 million ended for nine months
September 30, 2021, which was composed of the investments for the period.

Net cash provided by financing activities was $102.1 million for nine months
ended September 30, 2021, compared to $14.1 million of cash used in financing
activities for the nine months ended September 30, 2020. The main driver of this
variance is the $110.1 million in net cash received for warrant exercises offset
by the repayment of $10.6 million of the term loan during the nine months ended
September 30, 2021. Dividends of $30.8 million were paid to the parent of Old
GNOG during the comparable period in the prior year and contributions from LF,
LLC amounted to $16.8 million.

Critical accounting guidelines

Interim financial statements

The unaudited consolidated financial statements include all the accounts of GNOG
and its subsidiaries and have been prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). All
significant intercompany accounts and transactions have been eliminated.
Pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"), certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with GAAP have been omitted.
The interim financial information provided is unaudited, but includes all
adjustments which management considers necessary for the fair presentation of
the results for these periods. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the full year
period and should be read in conjunction with the Company's audited financial
statements and notes thereto included in the Company's Form 10-K/A filed with
the SEC.

In management's opinion, these unaudited consolidated financial statements
contain all adjustments necessary to fairly present our financial position,
results of operations, cash flows and changes in stockholders' equity for all
periods presented. Interim results for the three and nine months ended
September 30, 2021 may not be indicative of the results that will be realized
for the full year ending December 31, 2021.

Use of Estimates

The preparation of these unaudited consolidated financial statements requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of revenue and
expenses during the period reported. Management utilizes estimates, including,
but not limited to, the useful lives of assets and inputs used to calculate the
TRA liability. Actual results could differ from those estimates.

Reclassifications

Certain prior-year amounts have been reclassified to reflect the current year.

Liabilities from warrant derivatives

In accordance with ASC 815-40, Derivatives and Hedging: Contracts in an Entities
Own Equity, entities must consider whether to classify contracts that may be
settled in its own stock, such as warrants, as equity of the entity or as an
asset or liability. If an event that is not within the entity's control could
require net cash settlement, then the contract should be classified as an asset
or a liability rather than as equity. We have determined because the terms of
public warrants include a provision that entitles all warrant holders to cash
for their warrants in the event of a qualifying cash tender offer, while only
certain of the holders of the underlying shares of common stock would be
entitled to cash, our public warrants are classified as a liability measured at
fair value, with changes in fair value each period reported in earnings.

The sponsor warrants contain provisions that vary depending on the who holds the warrant. If the sponsor warrants are held by anyone other than the initial buyers or their eligible transferees, the sponsor warrant becomes the sponsor warrant

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will be redeemable by us and exercisable by such holders on the same basis as
the public warrants. This feature precludes the sponsor warrants from being
indexed to our common stock, and thus the warrants are classified as a liability
measured at fair value, with changes in fair value each period reported in
earnings.

The volatility of the value of the public and private warrants can lead to significant changes in the value of the derivatives and resulting gains and losses in our income statement.

For a full discussion of our critical accounting policies and estimates, see our annual report for the past year December 31, 2020.

Recent accounting announcements

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." This
guidance requires recognition of most lease liabilities on the balance sheet to
give investors, lenders, and other financial statement users a more
comprehensive view of a company's long-term financial obligations, as well as
the assets it owns versus leases. ASU 2016-02 will be effective for fiscal years
beginning after December 15, 2021, and for interim periods within annual periods
after December 15, 2022. In July 2018, the FASB issued ASU 2018-11 making
transition requirements less burdensome. The standard provides an option to
apply the transition provisions of the new standard at its adoption date instead
of at the earliest comparative period presented in the Company's financial
statements. We are currently evaluating the impact that this guidance will have
on our financial statements as well as the expected adoption method. We do not
believe the adoption of this standard will have a material impact on our
financial statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit
Losses: Measurement of Credit Losses on Financial Instruments", as additional
guidance on the measurement of credit losses on financial instruments. The new
guidance requires the measurement of all expected credit losses for financial
assets held at the reporting date based on historical experience, current
conditions and reasonable supportable forecasts. In addition, the guidance
amends the accounting for credit losses on available-for-sale debt securities
and purchased financial assets with credit deterioration. The new guidance is
effective for all public companies for interim and annual periods beginning
after December 15, 2019, with early adoption permitted for interim and annual
periods beginning after December 15, 2018. In October 2019, the FASB approved a
proposal which grants smaller reporting companies additional time to implement
FASB standards on current expected credit losses (CECL) to January 2023. As a
smaller reporting company, we will defer adoption of ASU No. 2016-13 until
January 2023. We are currently evaluating the impact this guidance will have on
our consolidated financial statements.

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