ARENA FORTIFY ACQUISITION CORP. References in this Quarterly Report on Form 10-Q for the three months endedMarch 31, 2022 (the "Quarterly Report") to "we," "our," "us" or the "Company" refer toArena Fortify Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer toArena Fortify Sponsor LLC . The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks, uncertainties and assumptions. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. See "Cautionary Statement Regarding Forward-Looking Statements." Also, see the risk factors and other cautionary statements described under the heading "Item 1A. Risk Factors." We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering (as defined below) filed with the
Overview
We are a blank check company incorporated as a
In
OnNovember 15, 2021 , we consummated the Initial Public Offering of 17,250,000 units (including 2,250,000 units issued upon exercise in full by the underwriters of their option to purchase additional units), at$10.00 per unit, generating gross proceeds of$172,500,000 . Each unit consists of one share of Class A common stock,$0.0001 par value, and one-half of one redeemable warrant ("Public Warrant"). Each Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of$11.50 per whole share.
Certain of our Initial Stockholders lent us an aggregate amount of
Simultaneously with the closing of the Initial Public Offering, our initial
stockholders purchased an aggregate of 5,450,000 private placement warrants
(including 450,000 private placement warrants issued in connection with the
exercise in full by the underwriters of their option to purchase additional
units), at a price of
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Following our Initial Public Offering, the closing of the over-allotment option, the sale of the Private Placement Warrants, and the receipt of proceeds from the Initial Stockholder Loans, approximately$175.9 million was placed in a trust account located inthe United States withContinental Stock Transfer & Trust Company acting as trustee, and invested only inU.S. "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in directU.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a business combination and (ii) the distribution of the trust account. If we are unable to complete an initial business combination within 15 months from the closing of our Initial Public Offering, orFebruary 15, 2023 , we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to$100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders' rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations underDelaware law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our entire activity from inception through
For the three months ended
Liquidity and Capital Resources and Going Concern
As of
Prior to the completion of our Initial Public Offering, our liquidity needs had
been satisfied through a payment from our Sponsor of
For the three months ended
For the period from
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Following our Initial Public Offering, the closing of the over-allotment option,
the receipt of proceeds from the Initial Stockholder Loans and the sale of the
Private Placement Warrants, a total of
In addition, in order to finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, provide us working capital loans. To date, there were no amounts outstanding under any working capital loans.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the completion of a business combination or one year from the date of the filing of this Quarterly Report. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However there is a risk that the company's liquidity may not be sufficient, which raises substantial doubt about the Company's ability to continue as a going concern. As indicated elsewhere in this Quarterly Report, we have untilFebruary 15, 2023 to consummate a business combination. If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Furthermore, if a business combination is not consummated by this date and an extension is not requested by our Sponsor, there will be a mandatory liquidation and subsequent dissolution of the company. Uncertainty related to the consummation of a business combination raises substantial doubt about the company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities to reflect a required liquidation afterFebruary 15, 2023 . Off-Balance Sheet Arrangements We do not currently have any off-balance-sheet arrangements; however, we do have certain contractual arrangements that would require us to make payments if certain circumstances occur; we refer to these arrangements as contingent commitments. See Note 6, "Commitments and Contingencies," to our financial statements included herein for further discussion of these matters. Contractual ObligationsPromissory Note-Related Party OnFebruary 22, 2021 , the Company issued an unsecured promissory note (the "Promissory Note"), pursuant to which the Company could borrow up to an aggregate of$300,000 to cover expenses related to the Initial Public Offering. The Promissory Note was non-interest bearing and was payable on the earlier of (i)December 31, 2021 or (ii) the consummation of the Initial Public Offering. OnNovember 12, 2021 , the Company repaid the outstanding balance under the Promissory Note.
Business Combination Marketing Agreement
The underwriters of the Company's Initial Public Offering are entitled to a fee
of
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Critical Accounting Policies and Significant Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has two classes of shares, which
are referred to as Class A common stock and Class B common stock. Income and
losses are shared pro rata between the two classes of shares. Net income (loss)
per share is computed by dividing net income (loss) by the weighted average
number of shares of common stock outstanding during the period. We have not
considered the effect of the warrants sold in the Initial Public Offering and
the private placement to purchase an aggregate of 14,075,000 shares of our
Class A common stock in the calculation of diluted income (loss) per share,
since their inclusion would be anti-dilutive under the treasury stock method.
The number of weighted average shares of Class B common stock for calculating
basic net income (loss) per share was reduced for the effect of an aggregate of
562,500 shares of Class B common stock that were subject to forfeiture if the
over-allotment option was not exercised in full or part by the underwriters.
Since the contingency was satisfied as of the beginning of the three-month
period ended
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity ("FASB ASC 480") and FASB ASC 815, Derivatives and Hedging ("FASB ASC 815"). The assessment considers whether the warrants are freestanding financial instruments pursuant to FASB ASC 480, meet the definition of a liability pursuant to FASB ASC 480, and whether the warrants meet all of the requirements for equity classification under FASB ASC 815, including whether the warrants are indexed to the Company's own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with FASB ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period until exercised. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statement of operations. Upon consummating the Initial Public Offering onNovember 15, 2021 , the company estimated the fair value of the warrant derivative liabilities using a Binomial lattice model and subsequently measured using a Monte Carlo simulation and the Black-Scholes Option Pricing Model at period-end. Subsequently, derivative warrant liabilities are classified as non-current as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. The determination of fair value for the warrant liabilities represents a significant estimate made by management in the unaudited condensed financial statements. 25
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Class A Common Stock Subject to Possible Redemption
The Company accounts for its shares of Class A common stock subject to possible redemption in accordance with the guidance in FASB ASC 480. Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable shares of common stock (including shares that feature 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) are classified as temporary equity. At all other times, Class A shares of common stock are classified as shareholders' equity. The Company's shares of Class A common stock sold in the Initial Public Offering feature certain redemption rights that are considered to be outside of the Company's control and subject to the occurrence of uncertain future events. Accordingly, as ofMarch 31, 2022 , 17,250,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders' deficit section of the Company's balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Such changes are reflected in additional paid-in capital, or in the absence of additional capital, in accumulated deficit.
JOBS Act
OnApril 5, 2012 , the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. As an "emerging growth company," we are not required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier.
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