UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to ____
Commission File No.
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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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
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 such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of December 23, 2022, there were
Eve Holding, Inc.
(Formerly EVE UAM, LLC)
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or similar terms or expressions or the negative thereof. These forward-looking statements include, but are not limited to, statements concerning the following:
The list above is not intended to be an exhaustive list of all of our forward-looking statements. Our forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. While we believe these expectations, forecasts, assumptions and judgments are reasonable, our forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. Our business, prospects, financial condition, operating results and the price of our common stock may be affected by a number of factors, whether currently known or unknown, including but not limited to those discussed in this Quarterly Report in Part I., Item 1. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the section titled “Risk Factors” in our Form S-1/A filed with the Securities and Exchange Commission on August 25, 2022. Any one or more of these factors could, directly or indirectly, cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.
Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” "Eve" “Eve Holding,” “we,” “us” and “our” refer to Eve Holding, Inc.
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September 30, |
December 31, |
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2022 |
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2021 |
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Assets |
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Current: |
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Total current assets |
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| Property, plant & equipment, net |
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Capitalized software, net |
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Total assets |
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Liabilities and Stockholders' equity |
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Current: |
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Accounts payable |
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Related party payables |
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Derivative financial instruments |
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Total current liabilities |
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Total liabilities |
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| STOCKHOLDERS' EQUITY | |||||||||
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Total liabilities and stockholders' equity |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-1 |
Eve Holding, Inc.
(FORMERLY EVE UAM, LLC)
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Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
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Operating expenses |
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(as restated) |
(as restated) | |||||||||||
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Research and development |
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$ |
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Selling, general and administrative |
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Loss from operations |
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Financial and foreign exchange gain/(loss), net |
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Loss before income taxes |
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Income tax expense |
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Net loss |
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| Net loss per share basic and diluted | ( |
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| Weighted-average number of shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
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Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||||
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2022 |
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2021 |
2022 | 2021 | |||||||||
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(as restated) | |||||||||||||||
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Net loss |
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Derivative financial instruments - cash flow hedge |
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Total comprehensive loss |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
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Common Stock |
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Shares |
Amount |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive loss |
Total Stockholders' equity |
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| Balance as of December 31, 2021 |
$ | $ | $ | ( |
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| Separation-related adjustment | - | - | ( |
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| Balance as of January 1, 2022 |
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| Net loss |
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| Contributions from Parent | - | - | - | - | ||||||||||||||||||||
| Balance as of March 31, 2022 |
$ | $ | $ | ( |
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| Net loss |
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| Reclassification of Public Warrants from liability to equity |
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| Issuance of fully vested New Warrants |
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| Issuance of common stock upon reverse recapitalization, net of fees |
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| Issuance of restricted stock and restricted stock expense |
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| Exercise of warrants held by PIPE investor |
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| Share based payment with non-employees |
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| Net distribution to Parent |
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| Balance as of June 30, 2022 |
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| Net loss (as restated) |
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| Issuance of New Shares | - | - | ||||||||||||||||||||||
| Issuance of fully vested New Warrants | - | - | - | - | ||||||||||||||||||||
| Issuance of restricted stock and restricted stock expense | - | - | - | - | ||||||||||||||||||||
| Share based payment with non-employees | - | - | - | - | ||||||||||||||||||||
| Balance as of September 30, 2022 |
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| F-4 |
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Common Stock |
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Shares |
Amount |
Net parent investment |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive loss |
Total Stockholders' equity |
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Balance as of December 31, 2020 |
$ | $ | ( |
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| Retroactive application of recapitalization | ( |
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| Balance as of January 1, 2021 | $ | $ | $ | $ | ( |
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Net loss |
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- | - | ( |
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Other comprehensive loss |
- | - | - | - | - | ( |
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Contributions from Parent |
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Balance as of March 31, 2021 |
$ | $ | $ | $ | ( |
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Net loss |
- | - | - | - | ( |
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Other comprehensive loss |
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Contributions from Parent |
- | - | - | - | - | |||||||||||||||||||||||
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Balance as of June 30, 2021 |
$ | $ | $ | $ | ( |
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| Net loss |
- |
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( |
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| Other comprehensive loss |
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| Contributions from Parent | - |
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| Balance as of September 30, 2021 |
$ |
$ |
$ |
$ |
( |
) | $ |
$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
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Nine Months Ended September 30, |
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2022 |
2021 |
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Cash flows from operating activities: |
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(as restated) |
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Net loss |
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$ | ( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of capitalized software |
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Long-term incentive plan expense |
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Changes in operating assets and liabilities: |
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Other assets |
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Related party receivables |
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Accounts payable |
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Other payables |
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Net cash used in operating activities |
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| Purchases of investment securities | ( |
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| Related party loan |
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| Property, plant & equipment |
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| Net cash provided by investing activities | ( |
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Cash flows from financing activities: |
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Transfer from Parent |
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Net cash provided by financing activities |
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| Increase (decrease) in cash and cash equivalents | ||||||||
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period |
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$ |
$ |
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Supplemental disclosure of other noncash investing and income taxes paid |
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Additions to capitalized software transferred by Parent |
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$ |
$ |
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| Income tax paid | ( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-6 |
Eve Holding, Inc.
(FORMERLY EVE UAM, LLC)
1. Organization and Nature of Business
The Company and Nature of Business
Eve Holding, Inc. (together with its subsidiaries, as applicable, “Eve”, the “Company”, “we”, “us” or “our”), a Delaware corporation, is an aerospace company with operations in Melbourne, Florida and Brazil. The Company is a former blank check company incorporated on November 19, 2020 under the name Zanite Acquisition Corp. (“Zanite”) 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.
Eve is dedicated to accelerating the urban air mobility ("UAM") ecosystem. Benefitting from a startup mindset and with a singular focus, Eve is taking a holistic approach to progressing the UAM ecosystem, with an advanced electrical vertical take-off and landing (“eVTOL”) project, a comprehensive global services and support network and a unique air traffic management solution.
Business Combination
On December 21, 2021, Zanite entered into a Business Combination Agreement (the “Business Combination Agreement”) with Embraer S.A., a Brazilian corporation (sociedade anônima) (“ERJ”), Embraer Aircraft Holding, Inc., a Delaware corporation (“EAH”) wholly owned by ERJ, and EVE UAM, LLC, a Delaware limited liability company (“Eve Sub”), a former subsidiary of EAH, that was formed for purposes of conducting the UAM Business (as defined in the Business Combination Agreement).
On May 9, 2022, in accordance with the Business Combination Agreement, the closing (the "Closing") of the transactions contemplated by the Business Combination Agreement (the “Business Combination”) occurred, pursuant to which Zanite issued
On December 21, 2021, December 24, 2021, March 9, 2022, March 16, 2022 and April 4, 2022, in connection with the Business Combination, Zanite entered into subscription agreements or amendments thereto (as amended from time to time, the “Subscription Agreements”) with certain investors, including certain strategic investors and/or investors with existing relationships with ERJ (the “Strategic Investors”), Zanite Sponsor LLC, a Delaware limited liability company (the “Sponsor”), and EAH (collectively, the “PIPE Investors”), pursuant to which, and on the terms and subject to the conditions of which, Zanite agreed to issue and sell to the PIPE Investors in private placements to close immediately prior to the Closing, an aggregate of
Upon Closing, all shares of Zanite Class A and Class B common stock were converted into, on a basis, shares of common stock of Eve Holding.
Both ERJ and Zanite's sponsors incurred costs in connection with the business combination ("Transaction Costs”). The Transaction Costs that were determined to be directly attributable and incremental to the Company and incurred related to the Business Combination were deferred and recorded as other assets in the balance sheet until the Closing. Such costs were subsequently recorded either as an expense of the Business Combination or a reduction of cash contributed with a corresponding reduction of additional paid-in capital if they were attributable to one or multiple sub-transactions of the Business Combination.
Accounting Treatment of the Business Combination
The Business Combination was accounted for as a reverse recapitalization, equivalent to the issuance of shares by Eve Sub for the net monetary assets of Zanite accompanied by a recapitalization. Accordingly, the consolidated assets, liabilities and results of operations of Eve Sub (or the "UAM Business", as applicable) became the historical financial statements of the Company, and the assets, liabilities and results of operations of Zanite were consolidated with Eve Sub beginning on the Closing date. For accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Eve Sub. The net assets of Zanite were recorded at historical costs, with no goodwill or other intangible assets recorded. Operations prior to the transaction are presented as those of Eve Sub (or the "UAM Business", as applicable) in future reports of the Company.
The financial statements included in this report reflect (i) the historical operating results of Eve Sub prior to the Business Combination; (ii) the combined results of Eve Sub and Zanite following the Closing; (iii) the assets and liabilities of Eve Sub at their historical cost; and (iv) the Company’s equity structure for all periods presented.
| F-7 |
EAH did not lose control over Eve Sub as a result of the Closing because EAH held approximately
Transaction costs incurred during the period from the first quarter of 2021 to the second quarter of 2022 related to the transaction with Zanite (Transaction Costs) were reviewed to conclude if they were direct and incremental to the Business Combination and which entity was the primary beneficiary. Direct and incremental costs were deferred to the extent permitted by the accounting standards by the primary beneficiary entity. Transaction Costs not considered to be direct and incremental were expensed by the primary beneficiary entity.
COVID-19 Pandemic
The World Health Organization declared a global emergency on January 30, 2020 with respect to the outbreak of a novel strain of coronavirus, or COVID-19 pandemic. There are many uncertainties regarding the continuing global COVID-19 pandemic, the full impact of which continues to evolve as of the date hereof. Eve is closely monitoring the COVID-19 pandemic situation and its impacts on its employees, operations, the global economy, the supply and the demand for its products and services, including the UAM Business.
The full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations remains uncertain. Management is actively monitoring the situation on its operations, suppliers, industry, and workforce.
2. Restatement of Previously Reported Financial Statements
The Company previously restated its financial statements for the year ended December 31, 2021, and for the unaudited quarters ended March 31, 2022, and 2021, and June 30, 2022, and 2021, as discussed in its Quarterly Report on Form 10-Q/A for the period ended June 30, 2022 and Current Report on Form 8-K/A, each filed with the SEC on December 8, 2022.
As previously disclosed, we reviewed the accounting for Transaction Costs incurred in connection with the transaction with Zanite, which include among other things fees for financial, accounting and legal advisors. The Transaction Costs were paid by ERJ and EAH and recognized by these entities without being pushed down to the Company. The Company concluded that the Transaction Costs that were directly related to the Company’s business should follow the guidance in SEC Staff Accounting Bulletin Topic 5.T, Accounting for Expenses or Liabilities Paid By Principal Stockholder(s), and should be pushed down and recorded in the Company’s financial statements in 2022 and 2021. The adjustment related to the Transaction Costs resulted in an additional expense of $
The unaudited condensed combined financial statements as of September 30, 2021 and the three and nine months ended September 30, 2021 have been restated to conform with the prior 2021 quarters as follows:
| F-8 |
UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, 2021 |
Nine Months Ended September 30, 2021 |
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| As Reported | Restatement Adjustments |
As Restated | As Reported | Restatement Adjustments |
As Restated | |||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Research and development | $ | ( |
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$ |
( |
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( |
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$ |
( |
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| General and administrative | ( |
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| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
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| Financial and foreign exchange gain, net | ( |
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) | ( |
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| Loss before income taxes | ( |
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) | ( |
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| Income tax benefit (expenses) | ||||||||||||||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ |
( |
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( |
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( |
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( |
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| Net loss per share basic and diluted | ( |
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| Weighted-average number of shares outstanding – basic and diluted | ||||||||||||||||||||||||
UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS
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Nine Months Ended September 30, 2021 |
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| As Reported | Restatement Adjustments | As Restated | ||||||||||
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Cash flows from operating activities: |
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Net loss |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of capitalized software |
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Changes in operating assets and liabilities: |
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Other assets |
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Accounts payable |
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Other payables |
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Net cash used in operating activities |
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Cash flows from financing activities: |
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Transfer from Parent |
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Net cash provided by financing activities |
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| Increase (decrease) in cash and cash equivalents | ||||||||||||
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period |
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Supplemental disclosure of other noncash investing and financing activities |
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Additions to capitalized software transferred by Parent |
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$ | $ |
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Note: The cash flow restatement related adjustments directly relate to the adjustment noted above that also impacted the statement of operations.
Please refer to the Audited Combined Financial Statements of the Urban Air Mobility Business of Embraer S.A. as of and for the years ended December 31, 2021 and 2020, as restated, filed on Form 8-K/A on December 8, 2022, for restatement adjustments impacting the December 31, 2021 consolidated balance sheet.
| F-9 |
3. Summary of Significant Accounting Policies
Basis of Presentation
Prior to the separation from ERJ, Eve Sub has historically operated as part of ERJ and not as a standalone company. The audited combined financial statements as of and for the year ended December 31, 2021, and for periods prior to December 31, 2021, have been derived from ERJ and EAH historical accounting records and are presented on a carve-out basis. As of January 1, 2022, Eve Sub began accounting for its financial activities as an independent entity.
The balances of Eve Soluções de Mobilidade Aérea Urbana Ltda. ("Eve Brazil"), a direct wholly-owned subsidiary of Eve, that were recorded in a foreign currency, were converted/translated into its functional currency, the US dollar, before being presented on the consolidated financial statements.
ERJ started charging the UAM business related R&D and G&A expenses to Eve through the Master Service Agreement (the "MSA") and Shared Service Agreement (the "SSA"). Therefore, there was no need to continue carving out expenses from ERJ and EAH.
All intercompany transactions’ balances between Eve Sub, and Eve Brazil (collectively, the "Eve Entities") were eliminated.
Until the Closing date, the unaudited condensed consolidated financial statements of Eve Sub reflect the assets, liabilities, and expenses that management determined to be specifically attributable to Eve Sub, as well as allocations of certain corporate level assets, liabilities and expenses, deemed necessary to fairly present the financial position, results of operations and cash flows of Eve, as discussed further below. Management believes that the assumptions used as basis for the allocations of expenses, direct and indirect, as well as assets and liabilities in the unaudited condensed consolidated financial statements are reasonable. However, these allocations may not be indicative of the actual amounts that would have been recorded had Eve operated as an independent, publicly traded company for the periods presented.
Prior to May 9, 2022, as a part of ERJ, Eve Sub was dependent upon ERJ for all of its working capital and financing requirements, as ERJ uses a centralized approach to cash management and financing its operations. Accordingly, cash and cash equivalents, debt or related interest expense have not been allocated to Eve its the unaudited condensed consolidated financial statements. Financing transactions related to Eve were accounted for as a component of Net Parent Investment in the unaudited consolidated balance sheets and as a financing activity on the accompanying unaudited condensed consolidated statements of cash flows.
The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC.
The carve-out methodology was used since Eve Sub’s inception in 2017 until the Closing date. Thus, after May 9, 2022, no carve-out amounts were included in Eve’s financial statements.
As of the Closing, ERJ concluded that all the assets and liabilities of Eve Sub were contributed by ERJ. No other assets or liabilities are evaluated to be attributable to Eve Sub, eliminating the necessity to allocate a portion of ERJ’s assets and liabilities to Eve on a carve-out basis. Thus, Management deemed it to be more appropriate to adopt a legal entity approach as of January 1, 2022, rather than a management approach.
| F-10 |
The management approach takes into consideration the assets that are being transferred to determine the most appropriate financial statement presentation. A management approach may also be appropriate when a parent entity needs to prepare financial statements for the sale of a legal entity, but prior to divestiture, certain significant operations of the legal entity are contributed to the parent in a common control transaction. On the other hand, the legal entity approach is often appropriate in circumstances when the transaction structure is aligned with the legal entity structure of the divested entity. One example would be when shares of a legal entity or a consolidated group of legal entities are divested. If the legal entity approach is deemed appropriate, all historical results of the legal entity, including those that are not ultimately transferred, should be presented in the historical financial statements through the date of transfer.
On December 14, 2021, the Company signed with ERJ the MSA and the SSA, through which ERJ charges Eve Sub for a significant part of the expenses Eve Sub was previously carving out. As previously explained, only a minor portion of Eve’s expenses, comprised of general overhead expenses, were allocated to Eve in order to better present its results in a stand-alone basis. For additional discussion of the MSA and SSA, refer to Note 5 Related Party Transactions.
Since the financial activities from the MSA and SSA signature date to December 31, 2021 were immaterial, Management chose to continue with the management approach for all of the year ended December 31, 2021 and to use the legal entity approach beginning January 1, 2022. Management continued to use the legal entity approach until the Business Combination was consummated on May 9, 2022 (i.e. after this date no carve-out amounts were added to Eve's financial statements). The Company has recorded the impacts of the balance sheet adjustment (i.e. separation-related adjustment) for the change in methodology as adjustments to the January 1, 2022 beginning balance sheet and not as a period activity attributable to the nine-month period ended September 30, 2022. The January 1, 2022 beginning balance sheet adjustments from the December 31, 2021 balances were as follows:
Separation-related adjustments
| As of December 31, | Separation-Related |
As of January 1, | |||||||||
| | 2021 | Adjustment |