UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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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
Or
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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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(I.R.S. Employer |
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(Address of Principal Executive Offices, including zip code) |
(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:
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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, 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 |
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Non-accelerated filer |
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Smaller reporting company |
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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 May 9, 2023, there were
Eve Holding, Inc.
(FORMERLY EVE UAM, LLC)
March 31, | December 31, | ||||||||
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2023 |
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2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
$ |
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Financial investments |
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Related party receivables |
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Related party loan receivable |
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Other current assets |
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Total current assets |
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Property, plant & equipment, net |
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Right-of-use assets, net | |||||||||
Total assets |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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Related party payables |
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Derivative financial instruments |
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Other payables |
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Total current liabilities |
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Other non-current payables | |||||||||
Total liabilities |
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Stockholders' Equity | |||||||||
Common stock, $ |
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Additional paid-in capital | |||||||||
Accumulated deficit | ( |
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Total stockholders' equity | |||||||||
Total liabilities and stockholders' equity |
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$ |
$ |
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The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.
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Three Months Ended March 31, |
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2023 | 2022 | ||||||
Operating expenses |
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Research and development |
$ | ( |
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Selling, general and administrative |
( |
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Loss from operations |
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Change in fair value of derivative liabilities |
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Financial investment income |
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Other financial 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 March 31, |
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2023 | 2022 | ||||||
Net loss |
$ | ( |
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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 |
Common Stock |
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Shares |
Amount |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive income/(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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- |
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Balance as of January 1, 2022 | $ |
$ |
$ |
( |
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$ |
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Net loss |
- | - | - | ( |
) | - | ( |
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Contributions from Parent | - |
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Balance as of March 31, 2022 | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Balance as of December 31, 2022 | $ |
$ |
$ |
( |
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$ |
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Net loss |
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Issuance of restricted stock and restricted stock expense |
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Share based payment with non-employees | - | - | - | - | ||||||||||||||||||||
Balance as of March 31, 2023 |
$ | $ | $ | ( |
) | $ | $ |
The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.
F-4 |
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Three Months Ended March 31, |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Non-cash lease expenses |
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Unrealized loss/(gain) on the exchange rate translation |
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Long-term incentive plan expense |
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Stock-based compensation | ||||||||
Warrants expenses |
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Interest on financial investments |
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Carve-out expenses (contributed from Parent) |
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Changes in operating assets and liabilities: | ||||||||
Other assets |
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Related party receivables |
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Accounts payable |
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Related party payables | ||||||||
Operating lease liabilities |
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Other payables |
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Net cash used in operating activities |
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Cash flows from investing activities: | ||||||||
Purchases of investment securities | ( |
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Property, plant & equipment |
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Net cash used in investing activities | ( |
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Effect of exchange rate changes on cash and cash equivalents | ||||||||
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 cash information |
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Cash paid for: |
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Income tax paid | $ |
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Supplemental disclosure of other non-cash investing activities | ||||||||
Property, plant & equipment expenditures in accounts payable and other accruals |
$ |
$ |
The accompanying Notes are an integral part of these unaudited condensed consolidated financial statements.
F-5 |
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 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
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, 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
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.
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 |
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ASSETS | |
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Current assets: | |||||||||||
Cash and equivalents | $ | $ |
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Capitalized software, net | ( |
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Total assets | $ | $ | ( |
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LIABILITIES AND NET PARENT EQUITY |
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Current liabilities: | |||||||||||
Accounts payable |
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Related party payables |
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Derivative financial instruments | ( |
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Other payables |
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Total current liabilities | |||||||||||
Other non-current payables | ( |
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Total liabilities | ( |
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Net parent equity: | |||||||||||
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Accumulated other comprehensive loss | ( |
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Total net parent equity | ( |
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Total liabilities and net parent equity | $ | $ | ( |
) | $ |
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, | |||||||
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2022 |
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Cash | $ | $ | ||||||
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Fixed deposits (ii) | ||||||||
Total |
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(ii) |
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
March 31, 2023 | ||||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
HTM securities, at cost: | ||||||||||||||||
Time deposits | $ | $ | $ | ( |
$ |
December 31, 2022 | |||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
HTM securities, at cost: | |||||||||||||||
Time deposits | $ | $ | $ | ( |
$ |
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.
F-10 |
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 $
Three Months Ended March 31, |
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2023 |
2022 | ||||||||
SG&A | $ | $ | ( |
) | |||||
R&D | |||||||||
Total |
$ | $ |
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
As of March 31, 2023, there is an outstanding related party payable of $
Fees and expenses in connection with the MSA are set to be payable within
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 $
F-11 |
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 $
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 | $ | $ |
$ |
$ |
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EAH | ||||||||||||||||
Atech | ||||||||||||||||
Other related parties | ||||||||||||||||
Total |
$ | $ |
$ |
$ |
Operating expenses - Three Months Ended March 31, |
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2023 | 2022 | |||||||
ERJ | $ | $ | ||||||
Atech | ||||||||
Other related parties | ||||||||
Total |
$ | $ |
6. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
March 31, | December 31, | |||||||
|
2023 |
|
|
2022 |
|
|||
Development mockup |
|
$ |
|
|
|
$ |
|
|
Leasehold improvement | ||||||||
Construction in progress ("CIP") |
||||||||
Computer hardware |
||||||||
Total |
$ |
|
|
$ |
|
|
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 $
F-12 |
Other current assets are comprised of the following:
March 31, | December 31, | |||||||
|
|
2023 |
|
|
2022 |
|||
Prepaid Directors & Officers insurance |
$ |
$ |
||||||
Income tax advance payments (i) |
||||||||
Advances to employees |
|
|
|
|
|
|||
Other current assets |
||||||||
Total |
|
$ |
|
|
$ |
|
(i)
8. Warrant Liabilities
Before the Closing, Zanite had issued
The exercise period of the Public and Private Placement Warrants started
Each Private Placement Warrant entitles its holder to purchase share of common stock at an exercise price of $
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 $
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.
9. Other Payables
Other Payables are comprised of the following items:
March 31, | December 31, | ||||||||
|
2023 |
|
|
2022 |
|||||
Accrued expenses (i) | $ |
$ |
|||||||
Provision for short-term incentive plan (ii) | |||||||||
Accruals related to payroll (iii) | |||||||||
Advances from customers (iv) |
|
|
|
|
|
|
|||
Social charges payable (v) |
|
|
|
|
|
|
|||
Long-term incentive plan (vi) |
|||||||||
Other payable |
|
|
|
|
|
|
|||
Income tax payable |
|||||||||
Total |
|
$ |
|
|
$ |
|
|||
Current portion |
|
$ |
|
|
$ |
|
|||
Non-current portion |
|
$ |
|
|
$ |
|
(i)
(ii)
(iii)
(iv)
(v)
(vi)
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$
The first line of credit (“Sub-credit A”), in the amount of R$
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.
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 $
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
Holders of common stock are entitled to
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.
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
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
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
The Company had reserved common stock for future issuance as follows:
2022 Stock Incentive Plan | |
Shares underlying Private Placement Warrants | |
Shares underlying Public Warrants | |
Shares underlying New Warrants |
Public Warrants
Each Public Warrant entitles its holder to purchase
Upon the Closing, all shares of Zanite Class A and Class B common stock were converted into, on a , 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 $
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)
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
The New Warrants issuable pursuant to the Strategic Warrant Agreements can be categorized as Penny Warrants, which are warrants with an exercise price of $
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.
F-16 |
(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 $
May 9, | ||||
Market Warrants with exercise price of $ |
2022 |
|||
Share Price (S0) | $ | |||
Maturity Date | ||||
Time (T) - Years | ||||
Strike Price (X) | $ | |||
Risk-free Rate (r) | % | |||
Volatility (σ) | % | |||
Dividend Yield (q) | % | |||
Warrant Value | $ |
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 $
As of December 31, 2022, the fair value of derivative financial instruments was recognized as a liability in the amount of $
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) | $ | $ |
||||||
Employees’ compensation |
||||||||
Other expenses |
||||||||
Travel & entertainment |
||||||||
Total |
$ | $ |
(i)
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 |
$ |
$ |
||||||
Outsourced service (i) |
||||||||
Director & Officers insurance |
||||||||
Other expenses | ||||||||
Travel & entertainment |
||||||||
Transaction Costs |
||||||||
Total |
$ | $ |