10-K

Large accelerated filer

Accelerated filer

Non-accelerated file
r

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-K

(Mark One)

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

For the fiscal year ended December 31, 2021

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

For the transition period from to

ARENA FORTIFY ACQUISITION CORP.

(Exact name of registrant as specified in its charter)


Delaware	001-39835	86-2228751
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

405 Lexington Avenue, 59th Floor

New York, New York 10174

(Address of principal executive offices))

Registrant’s telephone number, including area code: (212)

612-3205

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Units, each consisting of one share of Class A common stock, $0.0001 par value per share, and one-half of one redeemable warrant	AFACU	The Nasdaq Stock Market LLC
Shares of Class A common stock included as part of the units	AFAC	The Nasdaq Stock Market LLC
Redeemable warrants included as part of the units, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50	AFACW	The Nasdaq Stock Market LLC
Shares of Class A common stock underlying redeemable warrants included as part of the units	AFAC	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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

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

S-T

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

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

non-accelerated

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

12b-2

of the Exchange Act.

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

Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). ☒


Auditor Firm Id: 688		Auditor Name: Marcum LLP		Auditor Location: Hartford, CT

As of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s securities were not publicly traded. The registrant’s units began trading on The Nasdaq Stock Market LLC (the “NASDAQ”) on November 10, 2021 and the registrant’s shares of Class A common stock, par value $0.0001 (the “Class A common stock”), and warrants began trading on the NASDAQ on December 31, 2021. The aggregate market value of the common stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing sales price for the shares of Class A common stock on December 31, 2021, as reported on the NASDAQ, was $

220,282,500 (based on the closing sales price of the Class A common stock on December 31, 2021 of $12.77).

As of March 24,

2022, 17,250,000 shares of Class A common stock, par value $0.0001, and 4,312,500 shares of Class B common stock, par value $0.0001, were issued and outstanding.

Documents Incorporated by Reference: None.

Table of Contents

TABLE OF CONTENTS


		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			iii

PART I			3

Item 1.	Business		3

Item 1A.	Risk Factors		23

Item 1B.	Unresolved Staff Comments		61

Item 2.	Properties		61

Item 3.	Legal Proceedings		61

Item 4.	Mine Safety Disclosures		61

PART II			62

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		62

Item 6.	[RESERVED]		64

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		64

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		68

Item 8.	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		68

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		68

Item 9A.	Controls and Procedures		69

Item 9B.	Other Information		69

Item 9C.	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections		69

PART III			70

Item 10.	Directors, Executive Officers and Corporate Governance		70

Item 11.	Executive Compensation		80

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		81

Item 13.	Certain Relationships and Related Transactions, and Director Independence		83

Item 14.	Principal Accountant Fees and Services		87

PART IV			89

Item 15.	Exhibits, Financial Statements Schedules		89

Item 16.	Form 10-K Summary		91

Table of Contents

CERTAIN TERMS

Unless otherwise stated in this Annual Report on Form

10-K

(this “Report”), or the context otherwise requires, references to:

•

“

common stock

” are to our Class A common stock and our Class B common stock, collectively;

•

“

Cowen Investments II

” are to Cowen Investments II LLC;

•

“

founders

” are to our sponsor, Cowen Investments II and Intrepid Financial Partners;

•

“

founder shares

” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to our initial public offering, and the shares of our Class A common stock issuable upon the conversion thereof as provided herein;

•

“

initial stockholder loans

” are to the loans certain of our initial stockholders made to us simultaneously with the closing of our initial public offering;

•

“

initial stockholder loan warrants

” are to the warrants that may be issued to our initial stockholders upon conversion of the initial stockholder loans;

•

“

initial stockholders

” are to holders of our founder shares prior to our initial public offering;

•

“

Intrepid Financial Partners

” are to Intrepid Financial Partners, L.L.C.;

•

“

management

” or our “

management team

” are to our officers and directors, and “

directors

” are to our current directors;

•

“

private placement warrants

” are to the warrants issued to our initial stockholders in a private placement simultaneously with the closing of our initial public offering;

•

“

public shares

” are to shares of our Class A common stock sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market);

•

“

public stockholders

” are to the holders of our public shares, including our initial stockholders and members of our management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;

•

“

sponsor

” are to Arena Fortify Sponsor LLC, a Delaware limited liability company; and

•

“

,” “

our

,” “

company

,” “

AFAC

” or “

our company

” are to Arena Fortify Acquisition Corp.

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Report may include, for example, statements about:

•

our ability to select an appropriate target business or businesses;

•

our ability to complete our initial business combination;

•

our expectations around the performance of the prospective target business or businesses;

•

our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;

•

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;

•

our potential ability to obtain additional financing to complete our initial business combination;

•

our pool of prospective target businesses;

•

the ability of our officers and directors to generate a number of potential investment opportunities;

•

our public securities’ potential liquidity and trading;

•

our ability to complete an initial business combination due to the uncertainty resulting from the

COVID-19

pandemic, as well as from the emergence of variant strains of

COVID-19,

including the efficacy and adoption of recently developed vaccines with respect to

COVID-19

and variant strains thereof;

•

general market, political and economic conditions, including as a result of COVID-19 and the political environment of oil-producing regions, including uncertainty or instability resulting from civil disorder, an outbreak or escalation of armed hostilities or acts of war or terrorism;

•

the lack of a market for our securities;

•

the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;

•

the trust account not being subject to claims of third parties; or

•

our financial performance.

iii

Table of Contents

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

Table of Contents

SUMMARY OF RISK FACTORS

The following is a summary of the principal risks described below in Part I, Item 1A “Risk Factors” in this Report. We believe that the risks described in the “Risk Factors” section are material to investors, but other factors not presently known to us or that we currently believe are immaterial may also adversely affect us. The following summary should not be considered an exhaustive summary of the material risks facing us, and it should be read in conjunction with the “Risk Factors” section and the other information contained in this Report.

•

We are a recently formed company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.

•

Past performance by, or business associated with, our management team is not indicative of future performance of an investment in us.

•

Our public stockholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.

•

If we seek stockholder approval of our initial business combination, our initial stockholders have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.

•

Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash.

•

The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.

•

The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.

•

The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.

•

The requirement that we complete our initial business combination within the prescribed time frame after the closing of our initial public offering may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our business combination on terms that would produce value for our stockholders.

•

Our search for a business combination, and any target business with which we ultimately complete a business combination, may be materially adversely affected by the outbreak of the novel coronavirus

(COVID-19)

and variants thereof and the status of debt and equity markets.

Table of Contents

•

We may not be able to complete our initial business combination within the prescribed time frame after the closing of our initial public offering (by February 15, 2023), in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.

•

Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”

•

If we seek stockholder approval of our initial business combination, our founders, directors, officers, advisors and their affiliates may elect to purchase shares from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock.

•

Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.

•

If the net proceeds of our initial public offering and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate for at least 15 months from the closing of our initial public offering, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.20 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.

•

Transactions in connection with or in anticipation of our initial business combination and our structure thereafter may not be

tax-efficient

to our stockholders and warrant holders. As a result of our business combination, our tax obligations may be more complex, burdensome and uncertain.

•

If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

•

You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. Therefore, to liquidate your investment you may be forced to sell your public shares or warrants, potentially at a loss.

•

The NASDAQ may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

•

If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.

•

Certain of our warrants are accounted for as a warrant liability and are recorded at fair value upon issuance with changes in fair value each period to be reported in earnings, which may have an adverse effect on the market price of our ordinary shares.

•

We have identified a material weakness in our internal control over financial reporting as of December 31, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

Table of Contents

PART I

ITEM 1.

BUSINESS

Overview

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Report as our initial business combination. We have not selected any specific business combination target. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering, the initial stockholder loans, and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.

In February 2021, we issued 5,750,000 founder shares to our sponsor for an aggregate purchase price of $25,000 in cash, or approximately $0.004 per share. In March 2021, our sponsor sold 456,000 founder shares each to Cowen Investments II and Intrepid Financial Partners. On March 19, 2021, our sponsor transferred 25,000 shares to each of Marc McCarthy and James Crockard III. On October 4, 2021, we effected a share contribution back to capital resulting in our initial stockholders holding 4,312,500 shares of our Class B common stock.

On November 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. 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.

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 $1.00 per private placement warrant ($5,450,000 in the aggregate) in a private placement. Each private placement warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. Simultaneously with the closing of the initial public offering, we also issued promissory notes to each initial stockholder, generating aggregate gross proceeds to the company of $3,450,000. These notes shall be repaid in cash or converted into initial stockholder loan warrants at a purchase price of $1.00 per warrant, at each such lender’s sole direction. The initial stockholder loan warrants will be identical to the private placement warrants.

While we may pursue an initial business combination target in any business, industry or geographic location, and are not limited to any particular business, industry or geographic location, we intend to focus on acquisition candidates that have either recently emerged from bankruptcy court protection or will require incremental capital as part of a balance sheet restructuring within the broad natural resources industry. In particular, we believe that many post-restructured private companies suffer from a valuation discount due to their opaqueness, complexity, short term ownership base and overall lack of liquidity. We believe that our

in-depth

understanding of restructurings and post-restructuring company analysis, coupled with our management team’s extensive industry experience, as well as the more liquid publicly traded vehicle the company offers in an initial business combination, could result in significant value creation for our stockholders. Creating value for our stockholders is the ultimate goal of this business strategy. We intend to focus our search efforts on targets with an aggregate enterprise value of $750.0 million to $2.0 billion, though we may find a target that lies outside that range.

Table of Contents

We believe our management team is well positioned to identify attractive businesses within the natural resources industry that would benefit from access to the public markets and the skills of our management team. Our objective is to complete our initial business combination and enhance stockholder value by helping to identify and recruit effective management, enhance existing business models and strategic planning, identify and complete

follow-on

acquisitions, implement operational improvements, and expand product offerings and geographic footprint. We expect to utilize our management team’s experience and extensive relationship network to achieve these objectives. We intend to focus on evaluating established companies with leading competitive positions, strong management teams, and long-term potential for growth and profitability.

Market Opportunity

Investing in distressed companies, restructurings, post-restructured companies, illiquid and undercapitalized assets has been a core strategy of our management team and sponsors and is a core strategy of the company. While we may pursue an initial business combination in any industry, we believe the energy and energy-related sectors are presenting, and will continue to present, compelling investment and acquisition opportunities consistent with the company’s strategy for many reasons, including:

•

Industry Disruption

. Commodity price volatility and the economic dislocation caused by

COVID-19

has adversely impacted the financial performance of many quality companies and owners of quality assets in the energy and energy-related sectors. Many of these companies and assets were highly levered due to either private equity ownership or the general expansion of corporate borrowing over the most recent economic cycle. In order to improve their capital structures and support liquidity, these companies will require comprehensive balance sheet restructurings or incremental equity capital.

•

“Unnatural” Ownership

. Since 2015, the energy sector, including oil and gas exploration and production, oilfield services, and transportation, storage and processing, has seen bankruptcies comprising over $250 billion of liabilities at the time of our initial public offering.

In many instances, the illiquid, post-reorganization equity is held by former credit investors, including bank lenders and hedge funds, who may not have intended to own the equity and are seeking exit opportunities. We believe that a sale to the company could be a strategic option to these “unnatural” holders of equity and offers an attractive opportunity to create value for our stockholders.

•

Limited Capital Access and A&D Activity

. Many companies in the energy and energy-related sectors cannot access traditional sources of capital. Public equity issuance outside of the merger and acquisition context is at historically low levels, while the high yield market has only been available to select issuers with higher credit ratings. Several traditional bank lenders in the sector have reduced their exposure or have exited the industry all together due to environmental, social and governance concerns and regulatory risk overhangs. Limited capital access, coupled with a market for acquisitions and divestitures (“A&D”) that is at historical lows has led to fewer transactions and implied transaction values significantly lower than in recent years.

1	Source: Haynes and Boone, LLP Midstream Report, dated December 31, 2020; Haynes and Boone, LLP Oilfield Services Bankruptcy Tracker, dated December 31, 2020; Haynes and Boone, LLP Oil Patch Bankruptcy Monitor, dated December 31, 2020; FactSet; Bloomberg.

Table of Contents

We believe that when combined, these factors create a market characterized by a need for capital and an increased prevalence of willing sellers with limited exit options. We are positioned to act as a viable source of opportunity to companies in the energy sector while creating value for our stockholders.

Business Strategy

Our business strategy is to identify, combine with and maximize the value of a company that has either recently emerged from bankruptcy court protection or will require incremental capital as part of a balance sheet restructuring. While we may pursue an initial business combination target in any business, industry or geographic location, and are not limited to any particular business, industry or geographic location, we intend to focus on acquisition candidates that fit this profile within the broad natural resources industry. In particular, we believe that many post-restructured private companies suffer from a valuation discount due to their opaqueness, complexity, short term ownership base and overall lack of liquidity. We believe that our

in-depth

Distressed and post-restructured companies can provide an attractive investment opportunity due to the unique set of circumstances surrounding balance sheet restructurings and post-restructured capital structures. Balance sheets are typically restructured by swapping existing debt for new equity, and these restructurings often also require a capital injection into the company to fund operations and pay down debt that was not equitized. We believe that the former creditors of insolvent companies are not typically long-term holders of the new company’s equity, resulting in a valuation discount to publicly traded peers that may allow us to merge with a post-restructured company on highly favorable terms. In addition, post-restructured companies have an entirely different balance sheet, cost structure, asset base and sometimes a different management team relative to the

pre-restructured

company. In addition, typically a number of turnaround initiatives undertaken before and during the balance sheet restructuring have yet to manifest themselves in the operating results of the new company, resulting in a valuation that may not fully reflect the future positive operating performance of the company.

The company, in addition to securing investments from affiliates of Cowen and Company, LLC and Intrepid Partners, LLC, has established a relationship with the firms to leverage sourcing capabilities and accelerate identification of a target acquisition.

Investments in post-restructured or otherwise distressed businesses are subject to various risks. Investments in such companies are speculative, prices are volatile, and market movements are difficult to predict. Supply and demand for distressed securities change rapidly and are affected by a variety of market factors over which we have no control, and which may reduce the pool of profitable investment opportunities. Moreover, our ability to identify undervalued investment opportunities that fit our business strategy involves a high degree of uncertainty, and no assurance can be given that we will be able to identify such opportunities. In addition, such investments may take a substantial period of time before realizing their anticipated value and returns generated from such investments may not adequately compensate for the business and financial risks assumed. There is no guarantee that we will be able to achieve our investment objectives or provide any return on invested capital.

Table of Contents

Business Combination Criteria

Consistent with our business strategy, we have identified the following general criteria that we believe are important in evaluating candidates for our initial business combination. While we intend to utilize these criteria in evaluating business combination opportunities, we expect that no individual criterion will entirely determine a decision to pursue a particular opportunity. Further, any initial business combination opportunity that we ultimately determine to pursue may not meet one or more of these criteria.

•

Post Restructured Companies

. We intend to seek candidates that have recently restructured their balance sheet. We believe that post-restructured companies may be valued at a discount to their publicly traded peers due to the short term nature of their ownership base (former creditors are typically the new equity owners post-restructuring), the complexity in understanding their restructuring, the lack of clarity and information regarding their financial performance, the concentrated nature of their ownership base and the lack of publicly traded equity, among other reasons. Given the surge in restructuring activity within the natural resources sector over the last twelve months, we believe we may have the opportunity to identify an attractive asset held by

non-traditional

owners, such as commercial banks, or other senior secured lenders, seeking exit liquidity. We believe that post-restructured companies are where we have the strongest network to identify opportunities and the ability and experience to create stockholder value.

SEC Form 10-K filed by Arena Fortify Acquisition Corp.