**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        DC 20549**

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**FORM        10-QSB**

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**x Quarterly        Report        under Sections 13 or 15(d) of **

**the        Securities Exchange Act of 1934 for the quarterly period ended**
**March        31, 2006**

**o Transition        Report        under Sections 13 or 15(d) of the Securities Exchange Act of        1934**

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**Key        Hospitality Acquisition Corporation**

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** **

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**KEY        HOSPITALITY ACQUISITION CORPORATION**

**MARCH        31, 2006 QUARTERLY REPORT ON FORM 10-QSB**

**TABLE        OF CONTENTS**

|                                                                                                                                                                                                               |   | PAGE                       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|
|                                                                                                                                                                                                               |   |                       |
| PART I - FINANCIAL                INFORMATION                                                                                                                                                                 |   | F-1                        |
|                                                                                                                                                                                                               |   |                       |
| ITEM 1. Financial Statements                                                                                                                                                                                       |   | F-1                        |
|                                                                                                                                                                                                               |   |                       |
| Balance                  Sheet as of March 31, 2006 (unaudited)                                                                                                                                                    |   | F-1                        |
|                                                                                                                                                                                                               |   |                       |
| Statement                  of Operations for the three months ended March 31, 2006                  and the period from April 25, 2005 (Inception) to March 31,                  2006                  (unaudited) |   | F-2                        |
|                                                                                                                                                                                                               |   |                       |
| Statement                  of Cash Flows for the period from April 25, 2005                  (inception)to March 31, 2006 (unaudited)                                                                              |   | F-3                        |
|                                                                                                                                                                                                               |   |                       |
| Notes                  to Financial Statements                                                                                                                                                                     |   | F-4                  - F-5 |
|                                                                                                                                                                                                               |   |                       |
| ITEM 2. Management’s Discussion and Analysis                or Plan of Operation                                                                                                                        |   | 1                          |
|                                                                                                                                                                                                               |   |                       |
| ITEM 3. Controls and                Procedures                                                                                                                                                                |   | 2                          |
|                                                                                                                                                                                                               |   |                       |
| PART II - OTHER INFORMATION                                                                                                                                                                                   |   | 3                          |
|                                                                                                                                                                                                               |   |                       |
| ITEM 1. Legal Proceedings                                                                                                                                                                                     |   | 3                          |
|                                                                                                                                                                                                               |   |                       |
| ITEM 2. Unregistered Sales of Equity                Securities and Use of Proceeds                                                                                                                            |   | 3                          |
|                                                                                                                                                                                                               |   |                       |
| ITEM 3. Defaults Upon Senior                Securities                                                                                                                                                        |   | 3                          |
|                                                                                                                                                                                                               |   |                       |
| ITEM 4. Submission of Matters to a                Vote of                Security Holders                                                                                                                     |   | 3                          |
|                                                                                                                                                                                                               |   |                       |
| ITEM 5. Other Information                                                                                                                                                                                     |   | 3                          |
|                                                                                                                                                                                                               |   |                       |
| ITEM 6. Exhibits and Reports on Form                8-K                                                                                                                                                       |   | 3                          |

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**PART        I -**
**FINANCIAL        INFORMATION**

**ITEM        1.    **
**FINANCIAL        STATEMENTS**

**KEY        HOSPITALITY ACQUISITION CORPORATION**

**CONDENSED        BALANCE SHEET**

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|                                                                                                             |   | **March                    31, 2006** |       |
|------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                                                             |   | **(Unaudited)**                       |       |
| **ASSETS**                                                                                                       |   |                                  |       |
|                                                                                                             |   |                                  |       |
| **Current                      assets**                                                                          |   |                                  |       |
| Cash                                                                                                             |   | $                                     | 807,304    |   |
| Prepaid                    expenses                                                                              |   |                                  | 84,180     |   |
| Total                    current assets                                                                          |   |                                  | 891,484    |   |
|                                                                                                             |
| **Other                      assets,**                                                                           |   |                                  |       |   |
| cash                    and cash equivalents held in trust fund                                                  |   |                                  | 47,590,533 |   |
| Total                    assets                                                                                  |   | $                                     | 48,482,017 |   |
|                                                                                                             |
| **LIABILITIES                    AND STOCKHOLDERS' EQUITY**                                                      |   |                                  |       |   |
|                                                                                                             |   |                                  |       |   |
| **Current                      liabilities**                                                                     |   |                                  |       |   |
| Accrued                    accounting fees                                                                       |   | $                                     | 4,000      |   |
| Income                    taxes payable                                                                          |   |                                  | 150,000    |   |
|                                                                                                             |
| Total                    current liabilities                                                                     |   |                                  | 154,000    |   |
|                                                                                                             |
| Common                    stock, subject to possible redemption, 1,289,355 shares at                             |   |                                  |       |   |
| redemption                    value                                                                              |   |                                  | 9,370,812  |   |
|                                                                                                             |   |                                  |       |   |
| **Stockholders’                      equity**                                                              |   |                                  |       |   |
| Preferred                    stock, $.001 par value, authorized 1,000,000 shares; none                    issued |   |                                  |       |   |
| Common                    stock, $.001 par value, authorized 50,000,000 shares; issued                    and    |   |                                  |       |   |
| outstanding                    7,949,995 shares (which includes the 1,289,355 shares                    subject  |   |                                  |       |   |
| to                    possible redemption)                                                                       |   |                                  | 7,950      |   |
| Paid-in                    capital in excess of par                                                              |   |                                  | 38,542,855 |   |
| Retained                    earnings                                                                             |   |                                  | 406,400    |   |
| Total                    stockholders' equity                                                                    |   |                                  | 38,957,205 |   |
|                                                                                                             |   | $                                     | 48,482,017 |   |

*See          accompanying notes to financial          statements.*

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**KEY      HOSPITALITY ACQUISITION CORPORATION**

**CONDENSED      STATEMENTS OF OPERATIONS**

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|                                                                     |   |   | **Quarter                ended****3/31/2006** |   |   | **4/25/2005(Inception)                to3/31/2006** |   |
|--------------------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|-----------------------------------------------------|--------|
|                                                                     |   |   | **(Unaudited)**                               |   |   | **(Unaudited)**                                     |   |
|                                                                     |   |   |                                          |   |   |                                                |   |
| **Interest                income**                                       |   | $      | 478,126                                       |   | $      | 784,418                                             |   |
|                                                                     |   |   |                                          |   |   |                                                |   |
| **Operating                costs**                                       |   |   | 49,168                                        |   |   | 168,018                                             |   |
|                                                                     |
| **Income                before income taxes**                            |   |   | 428,958                                       |   |   | 616,400                                             |   |
|                                                                     |   |   |                                          |   |   |                                                |   |
| **Income                taxes**                                          |   |   | 150,000                                       |   |   | 210,000                                             |   |
|                                                                     |
| **Net                income**                                            |   | $      | 278,958                                       |   | $      | 406,400                                             |   |
|                                                                     |
| **Weighted                average shares outstanding basic and diluted** |   |   | 7,949,995                                     |   |   | 4,387,163                                           |   |
|                                                                     |
| **Net                income per share basic and diluted**                |   | $      | 0.04                                          |   | $      | 0.09                                                |   |

*See      accompanying notes to financial      statements.*

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**KEY      HOSPITALITY ACQUISITION CORPORATION**

**CONDENSED      STATEMENTS OF CASH FLOWS**

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|                                                                   |   | **Quarter                  ended****3/31/2006** |     | **4/25/2005****(Inception)                  to****3/31/2006**  |   |
|------------------------------------------------------------------------|--------|-------------------------------------------------|----------|---------------------------------------------------------------------|--------|
|                                                                   |   | **(Unaudited)**                                 |     | **(Unaudited)**                                                     |   |
|                                                                   |   |                                            |     |                                                                |   |
| **Cash                  flows from operating activities**              |   |                                            |     |                                                                |   |
| Net                  income                                            |   | $                                               | 278,958  |                                                                | $      | 406,400 |   |
| Increase                  (decrease) in cash attributable to change in |   |                                            |     |                                                                |   |   |   |
| Prepaid                  expenses                                      |   |                                            | 15,028   |                                                                |   | (84,180 | ) |
| Accrued                  legal fees                                    |   |                                            | (25,000  | )                                                                   |   |   |   |
| Accrued                  accounting fees                               |   |                                            | (20,000  | )                                                                   |   | 4,000 |   |
| Accrued                  franchise taxes                               |   |                                            | (52,700  | )                                                                   |   |   |   |
| Income                  taxes payable                                  |   |                                            | 90,000   |                                                                |   | 150,000 |   |
|                                                                   |
| **Net                  cash provided by operating activities**         |   |                                            | 286,286  |                                                                |   | 476,220 |   |
|                                                                   |
| **Net                  cash used in investing activity,**              |   |                                            |     |                                                                |   |   |   |
| cash                  and cash equivalents held in trust fund          |   |                                            | (409,818 | )                                                                   |   | (47,590,533 | ) |
|                                                                   |
| **Cash                  flows from financing activities**              |   |                                            |     |                                                                |   |   |   |
| Proceeds                  from sale of common stock                    |   |                                            |     |                                                                |   | 25,000 |   |
| Proceeds                  from notes payable, stockholders             |   |                                            |     |                                                                |   | 151,000 |   |
| Payment                  of notes payable, stockholders                |   |                                            |     |                                                                |   | (151,000 | ) |
| Gross                  proceeds of public offering                     |   |                                            |     |                                                                |   | 51,600,000 |   |
| Payments                  of costs of public offering                  |   |                                            |     |                                                                |   | (3,703,483 | ) |
| Sale                  of option                                        |   |                                            |     |                                                                |   | 100 |   |
|                                                                   |
| **Net                  cash provided by financing activities**         |   |                                            |     |                                                                |   | 47,921,617 |   |
|                                                                   |
| **Net                  increase (decrease) in cash**                   |   |                                            | (123,532 | )                                                                   |   | 807,304 |   |
| **Cash,**                  beginning of period                         |   |                                            | 930,836  |                                                                |   |   |   |
| **Cash,**                  end of period                               |   | $                                               | 807,304  |                                                                | $      | 807,304 |   |
|                                                                   |

*See      accompanying notes to financial      statements.*

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**KEY        HOSPITALITY ACQUISITION CORPORATION**

**NOTES        TO CONDENSED FINANCIAL STATEMENTS**

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| **1.** | ****Basis                of                presentation**** |
|--------|-------------------------------------------------------------|

| **2.** | **Nature                  of operations and summary of significant accounting                  policies** |
|--------|-----------------------------------------------------------------------------------------------------------|

*Nature      of Operations*

*Net      Income Per Common Share*

*Use      of Estimates*

| **3.** | **Initial                  public offering** |
|--------|----------------------------------------------|

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**KEY        HOSPITALITY ACQUISITION CORPORATION**

**NOTES        TO CONDENSED FINANCIAL STATEMENTS**

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| **4.** | **Income                  taxes** |
|--------|-----------------------------------|

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**ITEM      2.    **
**MANAGEMENT’S      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

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**ITEM      3.    **
**CONTROLS      AND PROCEDURES**

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**PART        II - **
**OTHER        INFORMATION**

**ITEM      1.    **
**LEGAL      PROCEEDINGS**

**ITEM      2.    **
**UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

**ITEM      3.    **
**DEFAULTS      UPON SENIOR SECURITIES**

**ITEM      4.    **
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM      5.    **
**OTHER      INFORMATION**

**ITEM      6.    **
**EXHIBITS**

| **Exhibit              No.** | **Description                of Exhibits** |
|------------------------------|--------------------------------------------|

| 31.1 | Section 302 Certification of                Principal                Executive Officer |
|------|----------------------------------------------------------------------------------------|

| 31.2 | Section 302 Certification of                Principal                Financial Officer |
|------|----------------------------------------------------------------------------------------|

| 32.1 | Section 906                Certification |
|------|------------------------------------------|

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**SIGNATURES**

|                            |                                                                                  |                                            |
|---------------------------------|---------------------------------------------------------------------------------------|-------------------------------------------------|
|                            | **KEY                HOSPITALITY ACQUISITION CORPORATION**                            |
|                       |                                                                             |                                       |
| Date:              May 12, 2006 | By:                                                                         | /s/ Jeffrey              S. Davidson  |
|                            | Jeffrey                S. Davidson                                                    |
|                            | *Co-Chairman                of the Board and**Chief                Executive Officer* |

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