evex-20230331.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2023
Or

☐	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. 001-39704

EVE HOLDING, INC.

(Exact name of registrant as specified in its charter)

Delaware	85-2549808
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1400 General Aviation Drive Melbourne, FL 32935
(Address of Principal Executive Offices, including zip code)

(321) 751-5050
(Registrant’s telephone number, including area code)

N/A

(Former name and address, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share Warrants, each whole warrant exercisable for one share of Common Stock	EVEX EVEXW	The New York Stock Exchange The New York Stock Exchange

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 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

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 ☐ No ☒

As of May 9, 2023, there were 269,094,021 shares of common stock, par value $0.001 per share, issued and outstanding.

Eve Holding, Inc.

(FORMERLY EVE UAM, LLC)

	Table of Content
PART I	FINANCIAL INFORMATION	F-1

Item 1.	Financial Statements	F-1
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023 and Consolidated Balance Sheet as of December 31, 2022	F-1
	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022	F-2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022	F-3
	Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2023 and 2022	F-4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	F-5
	Notes to Unaudited Condensed Consolidated Financial Statements	F-6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.	Controls and Procedures	12

PART II	OTHER INFORMATION	14

Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Mine Safety Disclosures	14
Item 5.	Other Information	14
Item 6.	Exhibits	15
	Signatures	16

Item 1. Financial Statements

Eve Holding, Inc.

(FORMERLY EVE UAM, LLC)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In US Dollars)


	March 31,			December 31,
		2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	11,837,193		$	49,146,063
Financial investments		199,119,647			178,781,549
Related party receivables		198,509			203,712
Related party loan receivable		83,640,600			82,650,375
Other current assets		740,699			1,425,507
Total current assets		295,536,648			312,207,206
Property, plant & equipment, net		594,282			451,586
Right-of-use assets, net		207,176			216,636
Total assets	$	296,338,106		$	312,875,428
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	490,148		$	2,097,097
Related party payables		16,222,416			12,625,243
Derivative financial instruments		5,757,000			3,562,500
Other payables		10,393,985			6,648,171
Total current liabilities		32,863,549			24,933,011
Other non-current payables		976,303			1,020,074
Total liabilities		33,839,852			25,953,085
Stockholders' Equity
Common stock, $0.001 par value; 1,000,000,000 shares authorized; 269,094,021 and 220,000,000 shares issued and outstanding on March 31, 2023 and December 31, 2022, respectively		269,094			269,094
Additional paid-in capital		505,009,464			503,661,571
Accumulated deficit		(242,780,304	)		(217,008,322	)
Total stockholders' equity		262,498,254			286,922,343
Total liabilities and stockholders' equity	$	296,338,106		$	312,875,428

The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.

F-1

Eve Holding, Inc.

(FORMERLY EVE UAM, LLC)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In US Dollars)

	Three Months Ended March 31,
		2023			2022
Operating expenses
Research and development	$	(21,528,338	)	$	(9,114,687	)
Selling, general and administrative		(6,154,319	)		(1,318,033	)
Loss from operations		(27,682,657	)		(10,432,720	)
Change in fair value of derivative liabilities		(2,194,500	)		-
Financial investment income		3,254,400			63,381
Other financial gain/(loss), net		1,024,490			359,331
Loss before income taxes		(25,598,267	)		(10,010,008	)
Income tax expense		(173,715	)		-
Net loss	$	(25,771,982	)	$	(10,010,008	)
Net loss per share basic and diluted	$	(0.09	)	$	(0.05	)
Weighted-average number of shares outstanding – basic and diluted		275,494,021			220,000,000

The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

Eve Holding, Inc.

(FORMERLY EVE UAM, LLC)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In US Dollars)

	Three Months Ended March 31,
	2023				2022
Net loss	$	(25,771,982	)	$	(10,010,008	)
Total comprehensive loss	$	(25,771,982	)	$	(10,010,008	)

The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

Eve Holding, Inc.

(FORMERLY EVE UAM, LLC)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In US Dollars)

	Common Stock
		Shares		Amount		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income/(loss)			Total Stockholders' equity
Balance as of December 31, 2021		220,000,000	$	220,000	$	53,489,579		$	(42,977,964	)	$	(32,226	)	$	10,699,389
Separation-related adjustment		-		-		(707,846	)		-			32,226			(675,620	)
Balance as of January 1, 2022		220,000,000	$	220,000	$	52,781,733		$	(42,977,964	)	$	-		$	10,023,769
Net loss		-		-		-			(10,010,008	)		-			(10,010,008	)
Contributions from Parent		-		-		732,776			-			-			732,776
Balance as of March 31, 2022		220,000,000	$	220,000	$	53,514,509		$	(52,987,972	)	$	-		$	746,537

Balance as of December 31, 2022		269,094,021	$	269,094	$	503,661,571		$	(217,008,322	)	$	-		$	286,922,343
Net loss		-		-		-			(25,771,982	)		-			(25,771,982	)
Issuance of restricted stock and restricted stock expense		-		-		867,893			-			-			867,893
Share based payment with non-employees		-		-		480,000			-			-			480,000
Balance as of March 31, 2023		269,094,021	$	269,094	$	505,009,464		$	(242,780,304	)	$	-		$	262,498,254

The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.

F-4

Eve Holding, Inc.

(FORMERLY EVE UAM, LLC)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US Dollars)

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(25,771,982	)	$	(10,010,008	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		22,050			-
Non-cash lease expenses		9,461			-
Unrealized loss/(gain) on the exchange rate translation		(58,553	)		-
Long-term incentive plan expense		98,321			-
Stock-based compensation		867,893			-
Warrants expenses		2,674,500			-
Interest on financial investments		(3,828,323	)		-
Carve-out expenses (contributed from Parent)		-			732,769
Changes in operating assets and liabilities:
Other assets		715,618			(1,242,627	)
Related party receivables		5,346			57,321
Accounts payable		(1,708,467	)		(98,593	)
Related party payables		3,597,173			8,241,343
Operating lease liabilities		(9,461	)		-
Other payables		3,495,301			450,845
Net cash used in operating activities		(19,891,123	)		(1,868,950	)
Cash flows from investing activities:
Purchases of investment securities		(17,500,000	)		-
Property, plant & equipment		(43,699	)		-
Net cash used in investing activities		(17,543,699	)		-
Effect of exchange rate changes on cash and cash equivalents		125,952			-
Decrease in cash and cash equivalents		(37,308,870	)		(1,868,950	)
Cash and cash equivalents at the beginning of the period		49,146,063			14,376,523
Cash and cash equivalents at the end of the period	$	11,837,193		$	12,507,573
Supplemental disclosure of cash information
Cash paid for:
Income tax paid	$	147,665		$	-
Supplemental disclosure of other non-cash investing activities
Property, plant & equipment expenditures in accounts payable and other accruals	$	121,047		$	-

The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.

F-5

Eve Holding, Inc.

(FORMERLY EVE UAM, LLC)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In US Dollars)

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 São José dos Campos, São Paulo. 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 “BCA”), with Embraer S.A., a Brazilian corporation (“sociedade anonima”) (“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 BCA).

On May 9, 2022, in accordance with the BCA, the closing (the “Closing”) of the transactions contemplated by the BCA (the “Business Combination”) occurred, pursuant to which Zanite issued 220,000,000 shares of Class A common stock to EAH in exchange for the transfer by EAH to Zanite of all of the issued and outstanding limited liability company interests of Eve Sub (the “Equity Exchange”). As a result of the Business Combination, Eve became a wholly-owned subsidiary of Zanite, which has changed its name to “Eve Holding, Inc.”

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 35,730,000 shares of Class A common stock at a purchase price of $10.00 per share, for an aggregate purchase price of $357,300,000, which included the commitment of the Sponsor to purchase 2,500,000 shares of Class A common stock for a purchase price of $25,000,000 and the commitment of EAH to purchase 18,500,000 shares of Class A common stock for a purchase price of $185,000,000 (the “PIPE Investment”). The PIPE Investment was consummated substantially concurrently with the Closing.

Upon Closing, all shares of Zanite Class A and Class B common stock were converted into, on a one-for-one 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, as the primary beneficiary of these expenses 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-6

EAH did not lose control over Eve Sub as a result of the Closing because EAH held approximately 90% of Eve’s shares immediately after the Closing. Therefore, the transaction did not result in a change in control that would otherwise necessitate business combination accounting.

Basis of Presentation

Prior to the separation from ERJ, Eve Sub has historically operated as part of ERJ and not as a standalone company. For periods as of and for the year ended December 31, 2021, and prior to December 31, 2021, the unaudited condensed consolidated financial statements have been derived from ERJ and EAH historical accounting records and are presented on a carve-out basis (“The Urban Air Mobility Business of Embraer S.A”). After the contribution of the UAM assets by ERJ and EAH (i.e., from December 31, 2021, until the Closing) the combined financial statements have been derived from Eve Sub and Eve Soluções de Mobilidade Aérea Urbana Ltda. (“Eve Brazil”) books. After the Closing the consolidated financial statements have been derived from the Company’s combined figures to retroactively recast the recapitalization of equity including EPS for all periods presented.

As of January 1, 2022, Eve Sub began accounting for its financial activities as an independent entity. The unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022, have been derived from Eve’s accounting records and certain carve-outs from ERJ and EAH’s historical accounting records.

The balances of 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 (“US Dollars”, “USD” or “$”), before being presented on the consolidated financial statements.

ERJ started charging the UAM business related research and development (“R&D”) and general and administrative (“G&A”) expenses to Eve through the Master Service Agreement (“MSA”) and Shared Service Agreement (“SSA”), respectively. 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. Financing transactions related to Eve were accounted for as a component of Net Parent Investment in the unaudited condensed consolidated balance sheets and as a financing activity on the accompanying unaudited condensed consolidated financial statements of cash flows.

The accompanying unaudited condensed consolidated financial statements are presented in US Dollar, unless otherwise noted 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.

Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. The unaudited condensed consolidated financial statements herein should be read in conjunction with our audited consolidated financial statements and notes thereto included within our most recent Annual Report on Form 10-K/A. These unaudited condensed consolidated financial statements reflect, in the opinion of Management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position and results of operations for the periods presented.

2. Summary of Significant Accounting Policies

The information presented under Debt updates our Significant Accounting Policies information presented in our 2022 Form 10-K/A to reflect the debt agreement Eve entered into during the three months ended March 31, 2023.

Change in Carve-out Methodology

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-7

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 twelve-months period ended December 31, 2022. The January 1, 2022 beginning balance sheet adjustments from the December 31, 2021 balances were as follows:

Separation-related Adjustments

		December 31,			Separation-Related			January 1,
		2021			Adjustment			2022
ASSETS
Current assets:
Cash and equivalents	$	14,376,523		$	(8	)	$	14,376,515
Related party receivables		220,000			-			220,000
Other current assets		6,274,397			(8,567	)		6,265,830
Total current assets		20,870,920			(8,575	)		20,862,345
Capitalized software, net		699,753			(699,753	)		-
Total assets	$	21,570,673		$	(708,328	)	$	20,862,345
LIABILITIES AND NET PARENT EQUITY
Current liabilities:
Accounts payable		877,641			(718,232	)		159,409
Related party payables		8,642,340			1,110,032			9,752,372
Derivative financial instruments		32,226			(32,226	)		-
Other payables		616,156			(94,361	)		521,795
Total current liabilities		10,168,363			265,213			10,433,576
Other non-current payables		702,921			(297,921	)		405,000
Total liabilities		10,871,284			(32,708	)		10,838,576
Net parent equity:
Net parent investment		10,731,615			(707,846	)		10,023,769
Accumulated other comprehensive loss		(32,226	)		32,226			-
Total net parent equity		10,699,389			(675,620	)		10,023,769
Total liabilities and net parent equity	$	21,570,673		$	(708,328	)	$	20,862,345

Management considers the legal entity approach to be the most meaningful representation of Eve’s standalone carve-out financial statements.

F-8

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is not an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Functional and Reporting Currency

Management has concluded that the US Dollar is the functional and reporting currency of Eve. Therefore, the consolidated financial statements that were derived from Eve entities’ financial statements are presented in USD.

The foreign currency gains and losses are related to transactions with suppliers recognized in the functional currency, USD, but settled in Brazilian reais (“BRL” or “R$”). The impacts were recognized in “Other financial gain/(loss), net” within the consolidated statements of operations.

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires the Company’s management to make estimates and judgments that affected the reported amounts of assets and liabilities and allocations of expenses. These judgments were based on the historical experience, management’s evaluation of trends in the industry and other factors that were deemed relevant at that time. The estimates and assumptions were reviewed on a regular basis and the changes to accounting estimates were recognized in the period in which the estimates were revised. The Company’s management recognize that the actual results could be materially different from the estimates. Under the legal entity approach, the significant estimates include, but are not limited to the measurement of warrants, fair value measurement and income taxes.

Debt

On January 23, 2023, Eve entered into a line of credit agreement. Any debt or borrowings from banks with an original maturity date falling within twelve months will be classified within current liabilities, as well as the current portion of any long-term debt. Debt or borrowings from banks with maturity dates greater than twelve months (long-term debt) will be classified within non-current liabilities, net of any current portion. Refer to Note 10 for additional information regarding the credit agreement.

New Accounting Pronouncements Not Yet Adopted

There are no recent accounting pronouncements pending adoption that the Company expects will have a material impact on our consolidated financial condition, results of operations or cash flows.

F-9

3. Cash and Cash Equivalents

Cash and cash equivalents consisted of the following:

	March 31,		December 31,
		2023		2022
Cash	$	4,690,191	$	14,446,534
Private securities ⁽ⁱ⁾		4,137,035		4,483,260
Fixed deposits⁽ⁱⁱ⁾		3,009,967		30,216,269
Total	$	11,837,193	$	49,146,063

(i)	Applications in Bank Deposit Certificates ("CDB’s"), issued by financial institutions in Brazil, immediately available for redemption.
(ii)	Fixed term deposits in US Dollar with original maturities of 90 days or less.

4. Financial Investments

Held to maturity (“HTM”) investments are recorded in the Condensed Consolidated Balance Sheets at amortized cost. These investments include time deposits with original maturities of one year or less, but greater than 90 days.

		March 31, 2023
		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
HTM securities, at cost:
Time deposits	$	199,119,647	$	-	$	(702,881)	$	198,416,766

		December 31, 2022
		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
HTM securities, at cost:
Time deposits	$	178,781,549	$	-	$	(1,127,925)	$	177,653,624

Allowance for losses on held to maturity debt instruments are assessed quarterly. No allowance for credit losses were recognized as of March 31, 2023 and December 31, 2022.

5. Related Party Transactions

Relationship with ERJ

Prior to the Closing of the transaction with Zanite, Eve Sub was managed, operated and funded by ERJ. Accordingly, certain shared costs have been allocated to Eve and reflected as expenses in Eve's stand-alone unaudited condensed consolidated financial statements. The expenses reflected in the unaudited condensed consolidated financial statements may not be indicative of expenses that will be incurred by Eve in the future.

a) Corporate costs

ERJ incurred corporate costs for services provided to the UAM Business. These costs include expenses for information systems, accounting, other financial services such as treasury, external audit, purchasing, human resources, legal and facilities. Also includes UAM related to R&D expenses.

Effective January 1, 2022, ERJ started charging Eve Sub for R&D and selling, administrative services under the MSA and SSA, respectively (see the MSA and SSA amounts in item b below). Additionally, from January 1, 2022, until the Closing date, Eve kept carving-out certain corporate costs.

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After the Closing, ERJ, EAH and other related parties started charging Eve for the costs that benefited the Company. The charges include the amounts that were previously carved-out from January 1, 2022, until the Closing date, plus amounts incurred after the Closing date. The corporate allocated costs included in the unaudited condensed consolidated statements of operations were $291,984 and $732,776 for the three months ended March 31, 2023 and for the three months ended March 31, 2022, respectively and were included into SG&A and R&D expenses for each of the year as follows:

	Three Months Ended March 31,
	2023			2022
SG&A	$	218,554	$	(13,664	)
R&D		73,430		746,440
Total	$	291,984	$	732,776

b) Transaction Costs

During the three months period ended March 31, 2022, both ERJ and EAH paid for Transaction Costs attributable to the UAM business. The Transaction Costs comprise but were not limited to, costs associated with lawyers, bankers, consulting and auditing services with the objective to effectuate the transaction with Zanite, as described in Note 1. Expenses directly related to the anticipated closing of the transaction with Zanite were capitalized and the remaining expenses were charged to the statement of operations as SG&A expenses.

c) Master Service Agreement and Shared Service Agreement

In connection with the transfer of the UAM Business to Eve Sub, ERJ and Eve Sub entered into a MSA and SSA on December 14, 2021. The initial terms for the MSA and SSA are 15 years. The MSA can be automatically renewed for additional successive one-year periods. The MSA has established a fee to be charged by ERJ to Eve so that Eve may be provided with access to ERJ’s R&D and engineering department structure, as well as, at Eve’s option, the ability to access manufacturing facilities in the future. The SSA has established a cost overhead pool to be allocated, excluding any margin, to Eve so that Eve may be provided with access to certain of ERJ’s administrative services and facilities which are commonly used across the ERJ business such as back-office shared service centers. In addition, on December 14, 2021, Eve Sub entered into a MSA with Atech Negócios em Tecnologias S.A., a Brazilian corporation (sociedade anônima) and wholly-owned subsidiary of ERJ (“Atech”), for an initial term of 15 years (the "Atech MSA"). Fees under the Atech MSA are charged to Eve for services related to Air Traffic Management, defense systems, simulation systems, engineering and consulting services.

As of March 31, 2023, there is an outstanding related party payable of $16,222,416 of which $15,692,297 and $273,769 are related to the MSA and SSA, respectively. During the three months ended March 31, 2023, Eve has incurred cost in the amount of $15,655,522, of which $15,088,828 is in relation to the MSA and $362,574 is in relation to the SSA.

Fees and expenses in connection with the MSA are set to be payable within 45 days of receipt by Eve of an invoice from ERJ together with documentation supporting the fees and expenses set forth on such invoice. Costs and expenses incurred in connection with the provision of shared services to Eve pursuant to the SSA are set to be payable within 45 days of receipt by Eve. All payments and amounts are due or paid in US Dollar and are recognized in the Related party payable caption.

d) Related party receivables/payables

Certain employees were transferred from ERJ to Eve. On the transfer date of each employee, all payroll related accruals were assumed by Eve, and it recognized a related party receivable from ERJ. Additionally, EAH transferred certain liabilities related to the Eve business, which led to the recognition of a receivable from EAH. This receivable balance is decreased when EAH pays for corporate expenses (e.g., health insurance) on behalf of Eve.

As of March 31, 2023, there is an outstanding related party receivable balance of $83,839,109, of which $198,509 relates to ERJ’s LTIP and a related party loan receivable and accrued interest in the amount of $83,640,600 with EAH, as stipulated below in section (f). As of March 31, 2023, there is an outstanding related party payable of $16,222,416, which is mostly comprised of balances due to ERJ and Atech under the MSA and SSA.

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e) Royalty-free licenses

The agreements with ERJ also allow Eve to access royalty-free license to ERJ’s background intellectual property to be used within the UAM market.

f) Related party loan

On August 1, 2022, the Company’s subsidiary, Eve Sub (the “Lender”), entered into a loan agreement (the “Loan Agreement”) with EAH, the Company’s majority stockholder, in order to efficiently manage the Company’s cash reserves at a rate of return that is favorable to the Company. Pursuant to the Loan Agreement, the Lender has agreed to lend to EAH an aggregate principal amount of up to $81,000,000 at an interest rate of 4.89% per annum. All unpaid principal advanced under the Loan Agreement, together with any accrued and unpaid interest thereon, shall be due and payable on August 1, 2023, which date may be extended upon mutual written agreement of the Lender and EAH. Any outstanding principal amount under the Loan Agreement may be prepaid at any time, in whole or in part, by EAH at its election and without penalty and the Lender may request full or partial prepayment from EAH of any outstanding principal amount under the Loan Agreement at any time. In accordance with the Company’s Related Person Transactions Policy, on July 22, 2022, the Loan Agreement was unanimously approved by the Company’s independent directors.

See below a summary of related party balances and the impacts on the results:

		March 31, 2023				December 31, 2022
		Assets		Liabilities		Assets		Liabilities
ERJ	$	198,509	$	15,614,958	$	190,518	$	11,347,799
EAH		83,640,600		41,190		82,650,375		655,519
Atech		-		351,108		13,194		136,036
Other related parties		-		215,160		-		485,889
Total	$	83,839,109	$	16,222,416	$	82,854,087	$	12,625,243

	Operating expenses - Three Months Ended March 31,
		2023		2022
ERJ	$	14,806,517	$	6,710,098
Atech		644,885		754,136
Other related parties		204,104		-
Total	$	15,655,506	$	7,464,234

6. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

		March 31,		December 31,
		2023		2022
Development mockup	$	376,849	$	397,785
Leasehold improvement		164,746		-
Construction in progress ("CIP")		44,375		44,375
Computer hardware		8,312		9,426
Total	$	594,282	$	451,586

The mockup was built to simulate the operation, design, interior space and cabin layout of Eve’s eVTOL.

Depreciation expense for the three months ended March 31, 2023 and 2022, was $22,050 and $0, respectively.

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7. Other Current Assets

Other current assets are comprised of the following:

	March 31,		December 31,
		2023		2022
Prepaid Directors & Officers insurance	$	325,764	$	1,292,317
Income tax advance payments ⁽ⁱ⁾		190,579		34,642
Advances to employees		183,215		74,064
Other current assets		41,141		24,484
Total	$	740,699	$	1,425,507

(i) Refers to federal withholding taxes and recoverable income taxes.

8. Warrant Liabilities

Before the Closing, Zanite had issued 11,500,000 redeemable warrants included in the units sold in the initial public offering (the "Public Warrants") and 14,250,000 redeemable warrants in private placements (the "Private Placement Warrants").

The exercise period of the Public and Private Placement Warrants started 30 days after the Closing (i.e., June 8, 2022) and will terminate on the earlier to occur of: (x) at 5:00 p.m., New York City time on the date that is five years after the Closing date, (y) the liquidation of the Company, or (z) the date fixed by the Company to redeem all of the warrants.

Each Private Placement Warrant entitles its holder to purchase one share of common stock at an exercise price of $11.50 per share, to be exercised only for a whole number of shares of our common stock. The Private Placement Warrants became exercisable 30 days after the Closing (i.e., June 8, 2022), provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Private Placement Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Private Placement Warrants on a cashless basis under the circumstances specified in the warrant agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder.

The Private Placement Warrants have similar terms as the Public Warrants, except for the fact that the Public Warrants are redeemable by the Company for cash at a price of $0.01 per Public Warrant if the closing price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading days period ending three business days before we send to the notice of redemption to the warrant holders. The Public Warrants may be exercised at any time after notice of redemption is given by the Company and prior to the Redemption Date. The Private Placement Warrants are not subject to the $0.01 cash redemption feature, but will be when the Private Placement Warrants are transferred to a third-party not affiliated with the Sponsor (referred to as a non-permitted transferee) and become Public Warrants. When this occurs, the calculation of the settlement amount of the Private Placement Warrants changes.

Since the settlement amount depends solely on who holds the instrument and this is not an input to the fair value of a fixed-for-fixed option or forward on equity shares, this provision causes the Private Placement Warrants to fail the indexation guidance of ASC 815-40. Thus, the Private Placement Warrants are liability classified.

Refer to the Note 11 and 16 for more details regarding the measurement of all warrants.

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9. Other Payables

Other Payables are comprised of the following items:

	March 31,		December 31,
	2023			2022
Accrued expenses ⁽ⁱ⁾	$	5,046,325	$	2,491,847
Provision for short-term incentive plan ⁽ⁱⁱ⁾		3,087,531		2,508,143
Accruals related to payroll ⁽ⁱⁱⁱ⁾		1,056,677		763,031
Advances from customers ^(iv)		800,000		800,000
Social charges payable^(v)		712,547		626,627
Long-term incentive plan ^(vi)		269,193		177,859
Other payable		222,020		300,738
Income tax payable		175,995		-
Total	$	11,370,288	$	7,668,245
Current portion	$	10,393,985	$	6,648,171
Non-current portion	$	976,303	$	1,020,074

(i) Accruals for services received from third parties whose invoices were not received.

(ii) Refers to accruals payable to employees.

(iii) Refers to accruals related to personnel obligations, primarily vacation expenses and other minor expenses.

(iv) Refers to advances from customers which have signed a letter of intent to purchase eVTOLs.

(v) Refers to social charges and taxes applicable in relation to personnel compensation.

(vi) These represent the ERJ’s LTIP obligations. The balances as of December 31, 2022, and March 31, 2023 relate to the LTIP obligation assumed by Eve towards certain grantees transferred from ERJ to Eve.

10. Debt

On January 23, 2023, Eve Brazil entered into a loan agreement (the “BNDES Loan Agreement”) with Banco Nacional de Desenvolvimento Economico e Social (“BNDES”), pursuant to which BNDES agreed to grant two lines of credit to Eve Brazil with an aggregate amount of R$490.00 million (approximately $96 million), to support the first phase of the development of the Company’s eVTOL project. All USD approximations use foreign currency exchange rate data as of March 31, 2023.

The first line of credit (“Sub-credit A”), in the amount of R$80.00 million (approximately $16 million), will be granted in Brazilian reais by Fundo Nacional Sobre Mudança Climática (“FNMC”), a BNDES fund that supports businesses focused on mitigating climate change and reducing carbon emissions, and will be subject to an interest rate of 4.55% per year. Sub-credit A has maturity dates on a monthly basis from March 2026 through February 2035. The second line of credit (“Sub-credit B”), in the amount of R$410.00 million (approximately $80 million), will be granted in US Dollar, as adjusted on a daily basis by the US Dollar sale rate published by the Central Bank of Brazil as the “PTAX” rate, and will be subject to an interest rate of 1.10% per year plus a fixed rate to be published by BNDES every 15 days in accordance with the BNDES Loan Agreement. Sub-credit B has maturity dates on a quarterly basis from May 2027 through February 2035.Such credit lines shall be used by Eve Brazil within 36 months from the date of signing of the BNDES Loan Agreement. Otherwise, BNDES may terminate the BNDES Loan Agreement and any loans shall be paid by no later than February 15, 2035. In addition, Eve Brazil shall pay a one-time R$2.05 million (approximately $400,000) fee to BNDES, whether or not Eve Brazil ends up using any credit.

The BNDES Loan Agreement provides that the availability of such lines of credit is subject to BNDES’s rules and regulations and, in the case of the first line of credit, FNMC’s budget and, in the case of the second line of credit, BNDES’s financing program (which is subject to funding by the Conselho Monetário Nacional, Brazil’s National Monetary Council). Additionally, the BNDES Loan Agreement provides that the borrowing of any amount under these lines of credit is subject to certain conditions, including, among others, the promulgation of a new law (which condition only applies to the first line of credit), the receipt by BNDES of a guarantee from an acceptable financial institution, absence of any facts that would have a material adverse effect on the economic or financial condition of Eve Brazil, and approval of the project by the applicable environmental entities.

As of March 31, 2023, Eve has not drawn from the lines of credit.

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11. Stockholders’ Equity

The Company’s common stock and warrants trade on the NYSE under the symbol “EVEX” and “EVEXW”, respectively. Pursuant to the terms of the Amended and Restated Certificate of Incorporation, the Company is authorized to issue the following shares and classes of capital stock, each with a par value of $0.001 per share: (i) 1,000,000,000 shares of common stock; and (ii) 100,000,000 shares of preferred stock. There were 269,094,021 and 220,000,000 shares of common stock issued and outstanding as of March 31, 2023 and 2022, respectively. The Company has retroactively adjusted the shares issued and outstanding prior to May 9, 2022, to give effect to the exchange ratio.

Preferred stock may be issued at the discretion of the Company's board of directors, as may be permitted by the General Corporation Law of the State of Delaware and without further stockholder action. The shares of preferred stock would be issuable for any proper corporate purpose, including, among other things, future acquisitions, capital raising transactions consisting of equity or convertible debt, stock dividends or issuances under current and any future stock incentive plans, pursuant to which the Company may provide equity incentives to employees, officers and directors and in certain instances may be used as an antitakeover defense. As of March 31, 2023 and December 31, 2022, there was no preferred stock issued and outstanding.

Holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders.

Holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s board of directors in its discretion out of funds legally available. No dividends on common stock have been declared by the Company’s board of directors through March 31, 2023 and the Company does not expect to pay dividends in the foreseeable future.

In the event of our voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of the Company’s common stock will be entitled to receive an equal amount per share of all of our assets of whatever kind available for distribution to stockholders, after the rights of the holders of any preferred stock have been satisfied.

United Subscription

In September 2022, the Company and United Airlines Ventures, Ltd. ("United"), entered the United Subscription Agreement pursuant to which United agreed to subscribe for an aggregate of 2,039,353 shares of common stock for a purchase price of $7.36 per share and an aggregate purchase price of $15,000,000. The United Investment was consummated on September 6, 2022.

The terms of the United Subscription Agreement are substantially similar to other Subscription Agreements signed by Eve.

Concurrently with the execution of the United Subscription Agreement, the Company and United also entered into the United Warrant Agreement, pursuant to which, at or promptly following the closing of the United Investment, the Company issued to United warrants to acquire up to 2,722,536 shares of Common Stock, each with an exercise price of $0.01 per share, which were issuable upon (i) the issuance by the parties of a joint press release announcing the United Investment, (ii) the entry by the Company and an affiliate of United into a conditional purchase agreement for the sale and purchase of up to 400 eVTOLs and (iii) the agreement by the Company and United to establish a concept of operations for the use of the Company’s eVTOLs at one or more of United’s or its affiliates’ hub airports. All 2,722,536 warrants were exercised by United on October 6, 2022. In addition, pursuant to the terms of the United Warrant Agreement, the Company has agreed to issue United additional warrants to acquire up to an additional 2,722,536 shares of Common Stock, each with an exercise price of $0.01 per share, which are issuable upon the entry into (i) a binding agreement between United (or one of its affiliates) and the Company for the sale and purchase of up to 200 eVTOLs and (ii) certain eVTOL services and support agreements.

Still in September 2022, United entered into a lock-up agreement with the Company, pursuant to which United will be restricted from transferring the new warrants issued to it at or promptly following the closing of the United Investment, as well as the shares of common stock issuable upon the exercise of such new warrants, until the date that is: (i) with respect to one of the two new warrants to acquire 680,634 shares of common stock, six months after the closing of the United Investment; (ii) with respect to the new warrant to acquire 1,361,268 shares of common stock, nine months after the closing of the United Investment; and (iii) with respect to the second new warrant to acquire 680,634 shares of common stock, twelve months after the closing of the United Investment.

The Company had reserved common stock for future issuance as follows:

2022 Stock Incentive Plan	8,730,000
Shares underlying Private Placement Warrants	14,250,000
Shares underlying Public Warrants	11,500,000
Shares underlying New Warrants	37,572,536

F-15

Public Warrants

Each Public Warrant entitles its holder to purchase one share of common stock at an exercise price of $11.50 per share, to be exercised only for a whole number of shares of our common stock. The Public Warrants became exercisable 30 days after the Closing (i.e., on June 8, 2022), provided that we have an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. The Public Warrants expire five years after the Closing or earlier upon redemption or liquidation. Once the Public Warrants become exercisable, we may redeem the outstanding Public Warrants at a price of $0.01 per warrant, if the last sale price of our common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading days period ending on the third business day before the Company sends the notice of redemption to the warrant holders.

Upon the Closing, all shares of Zanite Class A and Class B common stock were converted into, on a one-for-one basis, shares of common stock of Eve. As such, in a hypothetical change-in-control scenario, all holders of the stocks would receive cash. Additionally, the Public Warrants are indexed to the Company’s own stock. Thus, the amount of $10,580,000 related to the Public Warrants were reclassified from liability to equity.

New Warrants

In addition to the Public Warrants and the Private Placement Warrants, the Company has also entered into warrant agreements with certain of the strategic private investment in public equity investors ("Strategic PIPE Investors"), including United, pursuant to which and subject to the terms and conditions of each applicable warrant agreement, the Company has issued or has agreed to issue to the Strategic PIPE Investors warrants (the "New Warrants") to purchase an aggregate amount of (i) 24,095,072 shares of common stock with an exercise price of $0.01 per share, (ii) 12,000,000 shares of common stock with an exercise price of $15.00 per share and (iii) 5,000,000 shares of common stock with an exercise price of $11.50 per share. New Warrants for 29,472,536 shares of common stock were issued during 2022 (of which, 3,552,536 New Warrants were exercised during 2022) and New Warrants for 11,622,536 shares of common stock may be issued and vest subject to certain triggering events.

For the New Warrants subject to certain triggering events, the issuance and vesting of such warrants occurs upon the achievement of certain UAM Business milestones (which milestones include, as applicable, (a) receipt of the first type certification for eVTOL in compliance with certain airworthiness authorities, (b) receipt of the first binding commitment from a third-party to purchase eVTOL jointly developed by ERJ and a certain Strategic Investor for the defense and security technology market, (c) the eVTOL’s successful entry into service, (d) the completion of the initial term of a certain engineering services agreement to be entered into with a certain Strategic Investor (e) receipt of binding commitments from certain Strategic Investors for an aggregate of 500 eVTOL’s, (f) receipt of an initial deposit to purchase 200 eVTOL’s from a certain Strategic Investor, (g) the mutual agreement to continue to collaborate beyond December 31, 2022, with a certain Strategic Investor, (h) the time at which ten vertiports that have been developed or implemented with the services of a certain Strategic Investor have entered operation or are technically capable of entering operation and (i) signature of services and support agreements).

The New Warrants issuable pursuant to the Strategic Warrant Agreements can be categorized as Penny Warrants, which are warrants with an exercise price of $0.01 per share, or Market Warrants, which are warrants with an exercise price of $15.00 per share or $11.50 per share. The Penny Warrants have been issued, or are issuable in accordance with the terms of the Strategic Warrant Agreements, to certain Strategic PIPE Investors in connection with potential future commercial partnerships and the achievement of related commercial milestones. Of the existing Penny Warrants, certain of such warrants (a) were issued at Closing to such Strategic PIPE Investors in their capacities as potential future customers and suppliers and became vested without any exercise contingencies; (b) were issued at Closing to such Strategic PIPE Investors in their capacities as future potential suppliers, but which do not vest and become exercisable until the achievement of certain contingencies; and (c) are issuable to such Strategic PIPE Investors in their capacities as potential future customers and suppliers upon the satisfaction of certain specified conditions. The Market Warrants were issued at the Closing and vested immediately. There are no contingencies involved to exercise the Market Warrants.

Because the cash received for the common shares and New Warrants is significantly different from their fair value, Management considers such warrants to have been issued other than at fair market value. Accordingly, such warrants represent units of account separate from the shares of common stock that were issued to the Strategic PIPE Investors in connection with their respective PIPE Investments and therefore require separate accounting treatment.

Terms related to the issuance and exercisability of the New Warrants differ among the Strategic PIPE Investors and each New Warrant is independently exercisable such that the exercise of any individual warrant does not depend on the exercise of another. As such, Management has concluded that all New Warrants meet the criteria to be legally detachable and separately exercisable and therefore freestanding.

The New Warrants were classified, measured and recognized as an expense, by the Company as follows:

(a) Potential lender/financier: The New Warrants issued to potential lender/financier counterparties, which do not contain exercise contingencies, were determined to be within the scope of ASC 815 and equity-classified with the fair value at the issuance date recognized as New Warrants expense. As long as these warrants continue to be classified as equity, subsequent changes in fair value are not recognized.

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(b) Potential customers: The New Warrants issued or issuable to potential customers of Eve were determined to be within the scope of ASC 718 for classification and measurement and ASC 606, Revenue from Contracts with Customers, for recognition. Under ASC 718, they were determined to be equity-classified. These New Warrants can be separated into two categories: (i) contingently issuable warrants (the “Contingent Warrants”) and (ii) warrants that immediately vested upon Closing (“Vested Warrants”). The Contingent Warrants are measured at fair value on the grant date and will be recognized as variable consideration (a reduction of revenue) under ASC 606 when and if there are related revenue transactions or as New Warrants expense if there are not yet related revenue transactions. To date, there has been no recognition of expense related to the Contingent Warrants. The Vested Warrants were accounted for akin to a non-refundable upfront payment to a potential customer and were recognized as New Warrants expense since Eve has no current revenue or binding contracts in place).

(c) Potential suppliers: The New Warrants issued or issuable to potential suppliers of Eve, which are subject to the satisfaction of certain specified conditions, are accounted for as non-employee awards under ASC 718 and were determined to be equity-classified. The fair value of these warrants will be recognized as expense as products and/or services are received from the suppliers as if Eve paid cash for the respective transactions.

The Company’s New Warrants were measured at fair value on the respective grant dates (May 9, 2022 and September 1, 2022). The New Warrants with an exercise price of $0.01 have their fair values calculated taking Eve’s share price and subtracting $0.01. The New Warrants with an exercise price of $11.50 is estimated using the publicly traded Public Warrants since the terms are similar (see Note 16). The fair value of the New Warrants with an exercise price of $15.00 is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The Company used a modified Black-Scholes model to value the New Warrants with an exercise price of $15.00.

		May 9,
Market Warrants with exercise price of $15.00		2022
Share Price (S0)	$	11.32
Maturity Date		12/31/2025
Time (T) - Years		3.63
Strike Price (X)	$	15.00
Risk-free Rate (r)		2.85	%
Volatility (σ)		7.93	%
Dividend Yield (q)		0.00	%
Warrant Value	$	0.11

Forfeitures of New Warrants within the scope of ASC 718, granted to non-employees, are estimated by the Company and reviewed when circumstances change.

12. Derivative Financial Instruments

As discussed in Note 2, Change in carve-out methodology section, derivative financial instrument previously carved-out was not contributed to Eve.

During the second quarter of 2022, Eve started consolidating Zanite’s assets and liabilities which includes derivative financial instruments related to the Private Placement Warrants. As of March 31, 2023, the fair value of derivative financial instrument, which were exclusively Private Placement Warrants, was recognized as a liability in the amount of $5,757,000.

As of December 31, 2022, the fair value of derivative financial instruments was recognized as a liability in the amount of $3,562,500.

F-17

13. Research and Development

R&D expenses are comprised of the following items:

	Three Months Ended March 31,
		2023	2022
Outsourced service ⁽ⁱ⁾	$	19,437,329	$	8,145,863
Employees’ compensation		2,035,784		756,368
Other expenses		46,590		212,456
Travel & entertainment		8,635		-
Total	$	21,528,338	$	9,114,687

(i) For the three months ended March 31, 2023 and 2022, $15,088,828 and $7,336,164 were charged under the MSA contract, respectively. Refer to Note 5 for additional information regarding the MSA.

14. Selling, General and Administrative

Selling, general and administrative expenses are comprised of the following items:

	Three Months Ended March 31,
		2023	2022
Employees’ compensation	$	2,718,096	$	540,465
Outsourced service ⁽ⁱ⁾		2,109,835		219,874
Director & Officers insurance		1,002,412		-
Other expenses		240,753		27,582
Travel & entertainment		83,223		20,845
Transaction Costs		-		509,267
Total	$	6,154,319	$	1,318,033

(i) For the three months ended March 31, 2023 and 2022, $362,574 and $

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