| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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References to the “company,” “our,” “us” or “we” refer to Emerging Markets Horizon Corp. The following discussion and analysis of the company’s financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q for the period ended June 30, 2022 (the “Report”). Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, as amended (the “Exchange Act”).
We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those described in our other filings with the U.S. Securities and Exchange Commission (the “SEC”), including the “Risk Factors” section of our
Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”). Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether
as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses,
which we refer to throughout this Report as our initial business combination (the “Business Combination”). We intend to effectuate our Business Combination using cash derived from the proceeds of our initial public offering (the “Initial Public
Offering”) and the sale of the private placement warrants, our shares, debt or a combination of cash, shares and debt.
Our sponsor, New Emerging Markets Horizon, is controlled by FPP Capital Advisers (“FPP”), an affiliate of FPP Asset Management LLP (“FPP AM”). Prior to June 8, 2022, our sponsor was EM Horizon Investments (our “prior sponsor”), which at its
inception was controlled by FPP, Riccardo Orcel and Nevsky Properties Limited (“Nevsky Properties”), which is in turn controlled by VTB Bank (PJSC) (“VTB”). Following the imposition of sanctions relating to Russia by the United States and other
jurisdictions, including blocking sanctions against VTB as well as entities owned 50 percent or more, directly or indirectly, by VTB, we and our prior sponsor implemented certain remedial measures. On March 23, 2022, Nevsky Properties relinquished,
irrevocably and in perpetuity, its interest in our sponsor to the fullest extent permitted by law and such interest was blocked by our sponsor such that it no longer conferred under any circumstances any economic or voting rights upon Nevsky
Properties. In addition, following certain other changes in management effective on the same date, neither we nor our prior sponsor employed, had on its board of directors or received any services from any employees, representatives or affiliates
of VTB. Our prior sponsor was controlled solely by FPP as of April 21, 2022, when Mr. Orcel agreed to suspend indefinitely his voting and management rights in our prior sponsor, though he remained a non-voting member and Nevsky Properties formally
remained on our prior sponsor’s register of members due to certain restrictions under applicable Cayman Islands law.
On June 8, 2022, our prior sponsor and our sponsor entered into a novation agreement, whereby our prior sponsor transferred all of its rights and obligations under each of the contracts to which it was a party to our sponsor, and a securities
transfer agreement, whereby our prior sponsor transferred all of its founder shares and private placement warrants to our sponsor. While our sponsor remains controlled solely by FPP and Mr. Orcel remains a non-voting member, Nevsky Properties is
not on its register of members.
The registration statement for our Initial Public Offering was declared effective on December 8, 2021. On December 13, 2021, we consummated the Initial Public Offering of 28,750,000 units, including
the issuance of 3,750,000 units as a result of the underwriters’ exercise in full of their over-allotment option, at $10.00 per unit and the sale of 9,000,000 private placement warrants at a price of $1.50 per
warrant in a private placement to our prior sponsor that closed simultaneously with our Initial Public Offering.
Upon the closing of our Initial Public Offering, a total of $293,250,000, consisting of proceeds from the Initial Public Offering and the sale of the private
placement warrants, was placed in a trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”). The funds in the Trust Account will be invested only in U.S.
government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act until the earlier of: (i) the completion of
a business combination and (ii) the distribution of the funds in the Trust Account to our shareholders.
While we may pursue an initial business combination with a target at any stage of its corporate evolution or in any industry or sector, we intend to focus on identifying high-growth technology and consumer-exposed businesses with an enterprise
value of at least $700 million in Western Europe, Central and Eastern Europe (“CEE”), the Commonwealth of Independent States (the “CIS”) (excluding Russia and Belarus) or Latin America. We will seek to acquire businesses led by world-class
management teams, with validated technologies, proven business models and attractive unit economics, strong corporate governance compliant with Environmental, Social and Governance (“ESG”) principles and that are well positioned for continual
growth and market leadership over the long term.
We expect to continue to incur significant costs in the pursuit of a Business Combination. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues through June 30, 2022. All activities for the period from January 1, 2022 through June 30, 2022 were organizational activities and those necessary to identify a target company
for a Business Combination. We do not expect to generate any operating revenues until after the completion of a Business Combination. We generate non-operating income in the form of investment income on balances held in the Trust Account. We incur
expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended June 30, 2022 and the period from May 6, 2021 (inception) through June 30, 2021, we had net income of $937,061 and net loss of $3,471, respectively, an increase of $940,532. The period-over-period change consisted of a
gain on warrant liabilities of $1,168,750 and income earned on investments held in the Trust Account of $406,242, partially offset by an increase in formation and operating costs of $634,460.
For the six months ended June 30, 2022 and the period from May 6, 2021 (inception) through June 30, 2021, we had net income of $10,494,844 and net loss of $3,471, respectively, an increase of $10,498,315. The period-over-period change consisted
of a gain on warrant liabilities of $11,310,000 and income earned on investments held in the Trust Account of $432,913, partially offset by an increase in formation and operating costs of $1,244,598.
Liquidity and Capital Resources
On December 13, 2021, we consummated our Initial Public Offering of 28,750,000 units, at a price of $10.00 per unit, generating gross proceeds of $287,500,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 9,000,000 private placement warrants to our prior sponsor, at a price of $1.50 per private placement warrant generating gross proceeds of $13,500,000.
Following the Initial Public Offering, the full exercise of the over-allotment option and the sale of the private placement warrants, a total of $293,250,000 of the proceeds thereof was placed in the Trust
Account. We incurred $850,492 in other offering costs related to the Initial Public Offering, in addition to $5,750,000 in underwriting fees and $10,062,500 of
deferred underwriting fees. Of these total amounts, $1,071,693 was allocated to the warrant liabilities and included in non-operating expense.
For the six months ended June 30, 2022 and the period from May 6, 2021 (inception) through June 30, 2021, net cash used in operating activities was $457,848 and $43,625, respectively, consisting primarily of payments
made for formation, operating and deferred offering costs.
For the period from May 6, 2021 (inception) through June 30, 2021, net cash provided by financing activities was $122,000, consisting of proceeds received under a promissory note with the Prior Sponsor, which was
subsequently repaid upon the closing of the Initial Public Offering.
As of June 30, 2022, we had cash and marketable securities held in the Trust Account of $293,684,284. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing
investment income earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete a Business Combination. We may withdraw the investment income from the Trust Account to pay
taxes, if any, or up to $100,000 of dissolution expenses in the event of liquidation. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the
Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and/or pursue our growth strategies.
As of June 30, 2022, we had cash of $45,339 held outside of the Trust Account and a working capital deficit of $164,411. We
intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses and structure, negotiate and/or complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are
not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds held in the Trust Account released to us. In the event that a Business Combination does not close, we
may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination is less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to a Business Combination. Moreover, we may need to obtain
additional financing either to complete a Business Combination or because we become obligated to redeem a significant number of the public shares upon consummation of a Business Combination, in which case we may issue additional securities or incur
debt in connection with such Business Combination.
Going Concern Consideration
We assess going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an
Entity’s Ability to Continue as a Going Concern.” As of June 30, 2022, we had cash held outside of the Trust Account of $45,339 and a working capital deficit of $164,411. We have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. We will be using the funds in our operating account for paying existing accounts payable, identifying and
evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, paying general and administrative
expenses, and structuring, negotiating and consummating the Business Combination. Although we believe that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business
Combination or one year from this filing, there is a risk that our liquidity may not be sufficient. Additionally, in order to finance transaction costs in connection with a Business Combination, our sponsor, or an affiliate of our sponsor or
certain of our officers and directors may, but are not obligated to, provide us with working capital loans (“Working Capital Loans”). As of June 30, 2022, there were no amounts outstanding under any such Working Capital Loans; however, as of the
date these financial statements were issued, there was $561,996 outstanding under a Working Capital Loan in the form of a promissory note.
We are focused on identifying high-growth technology and consumer-exposed businesses in Western Europe, CEE, the CIS (excluding Russia and Belarus) or Latin America. The recent actions by Russia against Ukraine and
subsequent sanctions against Russia, Belarus and related individuals and entities have created global security concerns that could have a lasting impact on regional and global economies. In response to the imposition of such sanctions, we have
adjusted our target region to exclude Russia and Belarus.
We will have until March 13, 2023 (or June 13, 2023, as applicable), as such period may be extended pursuant to our amended and restated memorandum and articles of association, to complete a Business Combination (the
“Combination Period”). The end of the Combination Period will occur prior to one year after the issuance of these financial statements. There is no assurance that our plans to consummate a Business Combination will be successful during the
Combination Period. As outlined in our amended and restated memorandum and article of association, if we do not complete, or have an agreement in principle or a definitive agreement for, a business combination by the end of the Combination Period,
we will cease operations and redeem our public shares. Although we are continuing our pursuit of potential targets for an initial business combination, the end of the Combination Period occurring prior to one year after the issuance of these
financial statements creates substantial doubt regarding our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
As of June 30, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. We do not participate in transactions that create relationships with unconsolidated
entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters are entitled to a deferred underwriting fee of $0.35 per unit, or $10,062,500 in the aggregate. The deferred underwriting fee will become payable to the underwriters from the amounts held in the
Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Significant Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires our 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the critical accounting
policies set forth below.
Warrant Liabilities
We account for our public warrants and private placement warrants (collectively, the “Warrants”) as either equity-classified or liability-classified instruments based on an assessment of the Warrants’ specific
terms and applicable authoritative guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity,” and ASC Topic
815, “Derivatives and Hedging.” The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC Topic 480, whether Warrants meet the definition of a liability pursuant
to ASC Topic 480 and whether the Warrants meet all of the requirements for equity classification under ASC Topic 815, including whether the Warrants are indexed to the Class A ordinary shares, among other conditions for equity classification.
This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the Warrants and as of each subsequent quarterly period-end date while the Warrants are outstanding.
For issued or modified Warrants that meet all of the criteria for equity classification, the Warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or
modified Warrants that do not meet all of the criteria for equity classification, the Warrants are required to be recorded as liabilities at their initial fair value on the date of issuance and adjusted to fair value at each balance sheet date
thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Warrants are accounted for as liabilities and represent a significant accounting estimate. At June 30,
2022, the fair value of the public warrants was estimated based upon the exchange listed price, and the fair value of the private placement warrants was estimated using a Monte Carlo simulation approach.
Class A Ordinary Shares Subject to Possible Redemption
We account for the Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Class A
ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary 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 our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as a component
of shareholders’ deficit. The Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A ordinary shares subject to
possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of our balance sheet.
Net Income Per Ordinary Share
We have two classes of ordinary shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of ordinary shares. Net income per
ordinary share for each class of ordinary shares is computed by dividing net income allocated to the class by the weighted average number of ordinary shares of the class outstanding during the period. The calculation of diluted income per share
does not consider the effect of the Public Warrants issued in connection with the Initial Public Offering and the sale of the private placement warrants, because the exercise of the warrants is contingent upon the occurrence of future events and
the inclusion of such warrants would be anti-dilutive under the treasury stock method.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on our financial statements.
