Prospectus Supplement No. 6

(to Prospectus dated April 26, 2023)

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-265337

EVE HOLDING, INC.

319,264,425 SHARES OF COMMON STOCK

14,250,000 WARRANTS TO PURCHASE SHARES OF COMMON STOCK

66,845,072 SHARES OF COMMON STOCK UNDERLYING WARRANTS

 

This Prospectus Supplement, dated August 8, 2023 (the “Supplement”), supplements the prospectus, dated April 26, 2023, filed by Eve Holding Inc., a Delaware corporation (the “Company”), with the Securities and Exchange Commission (“SEC”) on April 26, 2023 pursuant to Rule 424(b) under the Securities Act of 1933, as amended, relating to the Registration Statement on Form S-1, as amended (File No. 333-265337) (the “Prospectus”), relating to the issuance by the Company of up to 66,845,072 shares of common stock, comprising (i) the shares of common stock that may be issued upon exercise of 11,500,000 outstanding public warrants (as defined in the Prospectus), (ii) the shares of common stock that may be issued upon exercise of 14,250,000 outstanding private placement warrants (as defined in the Prospectus), and (iii) up to 41,095,072 shares of common stock that may be or have been issued upon exercise of the new warrants (as defined in the Prospectus). The Prospectus also relates to the resale by certain of the Selling Securityholders (as defined in the Prospectus) of up to 319,264,425 shares of common stock, comprising (i) 220,000,000 shares of common stock issued in connection with the business combination with the urban air mobility business of Embraer S.A., a Brazilian corporation (sociedade anônima) (“Embraer”), originally issued at a price of $10.00 per share in exchange for Embraer’s interests in EVE UAM, LLC, (ii) 35,730,000 shares of common stock issued to certain qualified institutional buyers and accredited investors in private placements consummated in connection with the business combination, originally issued at a price of $10.00 per share, (iii) 5,750,000 shares of common stock that were converted in connection with the business combination on a one-to-one basis from Zanite Acquisition Corp. Class B common stock originally issued at a price of $0.004 per share, (iv) 260,000 shares of common stock underlying restricted stock units granted to certain directors and an officer of the Company, (v) 140,000 restricted shares of common stock granted to an officer of the Company, (vi) up to 14,250,000 shares of common stock that may be issued upon exercise of private placement warrants held by certain parties to the Amended and Restated Registration Rights Agreement (as defined in the Prospectus), originally issued at a price of $1.00 per warrant, (vii) up to 41,095,072 shares of common stock that may be or have been issued upon exercise of new warrants that have been issued or are issuable, subject to triggering events, to United Airlines Ventures, Ltd., a Cayman Islands company (“United”), and certain Strategic PIPE Investors (as defined in the Prospectus) originally issued in connection with entering into certain commercial arrangements without the payment of any purchase price and (viii) 2,039,353 shares of common stock issued to United in a private placement consummated on September 6, 2022 for a purchase price per share of $7.36 and an aggregate purchase price of $15,000,000. The Prospectus also relates to the resale by certain of the Selling Securityholders of 14,250,000 private placement warrants held by certain parties to the Amended and Restated Registration Rights Agreement, originally issued at a price of $1.00 per warrant.

This Supplement is being filed to update and supplement the information contained in the Prospectus with the information from our Form 10-Q, filed with the SEC on August 8, 2023 (the “Form 10-Q”). Accordingly, we have attached the Form 10-Q to this Supplement.

This Supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This Supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this Supplement, you should rely on the information in this Supplement.

Our common stock and public warrants trade on the New York Stock Exchange under the symbols “EVEX” and “EVEXW,” respectively. On August 7, 2023, the last quoted sale price for our common stock as reported on NYSE was $8.50 per share and the last quoted sale price for our public warrants was $0.7952 per warrant.

We are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for this prospectus and for future filings.

Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing in our securities in “Risk Factors” beginning on page 12 of the Prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this Supplement is truthful or complete. Any representation to the contrary is a criminal offense.

This Supplement is dated August 8, 2023



 

 

 

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 June 30, 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
(Registrants 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 August 8, 2023, there were 269,163,921 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 (Unaudited) F-1



Item 1. Financial Statements F-1

Condensed Consolidated Balance Sheets F-1

Condensed Consolidated Statements of Operations F-2

Condensed Consolidated Statements of Comprehensive Loss F-3

Condensed Consolidated Statements of Equity F-4

Condensed Consolidated Statements of Cash Flows F-5

Notes to Condensed Consolidated Financial Statements F-6

Note 1 – Organization and Nature of Business F-6

Note 2 – Summary of Significant Accounting Policies F-7

Note 3 – Cash and Cash Equivalents F-10

Note 4 – Financial Investments F-10

Note 5 – Related Party Transactions F-10

Note 6 – Other Balance Sheet Components F-12

Note 7 – Debt F-13

Note 8 – Derivative Financial Instruments F-14

Note 9 – Fair Value Measurement  F-14

Note 10 – Stockholders’ Equity F-15

Note 11 – Common Stock Warrants F-15

Note 12 – Share-based Payments F-18

Note 13 – Earnings Per Share F-18

Note 14 – Research and Development F-19

Note 15 – Selling, General and Administrative F-19

Note 16 – Income Taxes F-19

Note 17 – Commitments ​and Contingencies F-19

Note 18 – Segments
F-20
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

PART I  FINANCIAL INFORMATION (Unaudited)

Item 1.  Financial Statements

EVE HOLDING, INC.

(FORMERLY EVE UAM, LLC)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)




June 30,

December 31,



2023


2022


ASSETS








Current assets

 






 

 


      Cash and cash equivalents

 


$ 33,591,771


$

49,146,063


      Financial investments



150,782,326



178,781,549

      Related party receivables

 



313,762


 

203,712


      Related party loan receivable



84,641,828



82,650,375

      Other current assets

​​



1,461,953


 

1,425,507


Total current assets

​​



270,791,640


 

312,207,206


      Property, plant & equipment, net



513,833



451,586

      Right-of-use assets, net


550,129



216,636

Total assets


$ 271,855,602


$

312,875,428


LIABILITIES AND STOCKHOLDERS' EQUITY






 

 


Current liabilities






 

 


     Accounts payable

 


$ 2,350,540


$

2,097,097


     Related party payables




17,733,475



12,625,243

     Derivative financial instruments



12,541,425


 

3,562,500


     Other payables



5,961,337

 

6,648,171


Total current liabilities



38,586,777


 

24,933,011


     Other non-current payables


1,530,522



1,020,074

Total liabilities

 



40,117,299


 

25,953,085


Stockholders' Equity









Common stock, $0.001 par value


269,164



269,094

Additional paid-in capital


505,659,469



503,661,571

Accumulated deficit


(274,190,330 )

(217,008,322 )
Total stockholders' equity


231,738,303



286,922,343

Total liabilities and stockholders' equity

 


$ 271,855,602


$

312,875,428


 

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

Amounts may not add due to rounding.


F-1


EVE HOLDING, INC.

(FORMERLY EVE UAM, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


Three Months Ended June 30,


Six Months Ended June 30,



2023


2022




2023


2022

Operating expenses
















Research and development

$ 21,821,255

$ 10,417,278
$ 43,349,593
$ 19,531,965

Selling, general and administrative


6,633,106


15,728,933

12,787,425

17,046,966
New Warrants expenses 

-


87,352,000


-


87,352,000

Loss from operations


(28,454,361 )

(113,498,211 )

(56,137,018 )

(123,930,931 )
Change in fair value of derivative liabilities

(6,784,425 )

5,842,500

(8,978,925 )

5,842,500

Financial investment income


2,982,448


824,567


6,236,848



887,948

Other financial gain/(loss), net


1,149,332


(260,713 )

2,173,822

98,618

Loss before income taxes


(31,107,006 )

(107,091,857 )

(56,705,273 )

(117,101,865 )

Income tax expense 


(303,020 )

(129,708 )

(476,735 )

(129,708 )

Net loss

$ (31,410,026 )
$ (107,221,565 )
$ (57,182,008 )
$

(117,231,573

)
Net loss per share basic and diluted $ (0.11 )
$ (0.43 )
$
(0.21 )
$
(0.50 )
Weighted-average number of shares outstanding – basic and diluted
275,632,354


248,989,790


275,563,187


234,574,977


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

Amounts may not add due to rounding.


F-2

EVE HOLDING, INC.

(FORMERLY EVE UAM, LLC)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 


Three Months Ended June 30,


Six Months Ended June 30,



2023


2022

2023


2022

Net loss


$ (31,410,026 )
$ (107,221,565 )
$ (57,182,008 )
$ (117,231,573 )

Total comprehensive loss


$ (31,410,026 )
$ (107,221,565 )
$ (57,182,008 )
$ (117,231,573 )


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

Amounts may not add due to rounding.


F-3

EVE HOLDING, INC.

(FORMERLY EVE UAM, LLC)
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)


Common Stock



















Shares



Amount




Additional Paid-In Capital



Accumulated Deficit



Accumulated Other Comprehensive 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
Net loss

-


-


-


(107,221,565 )

-


(107,221,565 )
Reclassification of Public Warrants from liability to equity

-


-


10,580,000


-


-


10,580,000
Issuance of fully vested New Warrants

-


-


87,352,000


-


-


87,352,000
Issuance of common stock upon reverse recapitalization, net of fees

43,392,132


43,392


315,283,325


-


-


315,326,717
Share-based compensation and issuance of stock

140,000


140


1,935,848

-


-


1,935,988
Exercise of warrants held by PIPE investor

800,000


800


7,200

-


-


8,000
Share-based payment with non-employees

-


-


1,028,182


-


-


1,028,182
Contributions from Parent

-



-



(2,105,409
)

-


-



(2,105,409
)
Balance as of June 30, 2022

264,332,132

$ 264,332

$ 467,595,655

$ (160,209,537 )
$ -

$ 307,650,450

























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 )
Share-based compensation

-


-


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
Net loss 


-


-


-


(31,410,026 )

-


(31,410,026 )
Share-based compensation and issuance of stock

69,900


70


650,005


-


-


650,075
Balance as of June 30, 2023


269,163,921

$ 269,164

$ 505,659,469

$
(274,190,330 )
$
-

$ 231,738,303



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

Amounts may not add due to rounding.


EVE HOLDING, INC.

(FORMERLY EVE UAM, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,

2023


2022

 

Cash flows from operating activities:

 


 


 

 

 

Net loss

 

$ (57,182,008 )

$

(117,231,573

)

Adjustments to reconcile net loss to net cash used in operating activities:

 





 

 

 

      Depreciation and loss on disposal of property


103,133



-

      Non-cash lease expenses


33,710



-

      Unrealized gain on exchange rate translation


(335,838
)

(136,644
)
      Share-based compensation

1,805,122


1,935,988

      Warrant expenses


480,000

88,380,182
      Change in fair value of derivative financial instruments

8,978,925


(5,842,500 )
  Changes in operating assets and liabilities:







      Accrued interest on financial investments, net


(4,000,777
)

(464,652
)
      Accrued interest on related party loan receivable


(1,991,453
)

-

      Other assets

 


20,407

 

6,098,874

      Related party receivables

 


(109,329 )

 

(36,943

)

      Accounts payable

 


201,622

 

2,623,858

      Related party payables

5,074,539


1,094,121

      Other payables

 


(681,889 )

 

1,725,014

 

Net cash used by operating activities 

 


(47,603,836 )


(21,854,275

)
Cash flows from investing activities: 







       Redemptions of financial investments


57,500,000



-

       Purchases of financial investments


(25,500,000 )

(154,000,000 )
       Expenditures for property, plant and equipment


(165,380
)

-

Net cash provided (used) by investing activities

31,834,620

(154,000,000 )
Cash flows from financing activities:







       Tax withholding on share-based compensation

(287,154
)

-

       Capital contribution net of transaction costs reimbursed to Zanite

-


354,830,252
       Transaction Costs reimbursed to parent

-


(15,754,066 )
       Distribution to parent, net

-


(1,372,633 )
Net cash provided (used) by financing activities

(287,154 )

337,703,553
          Effect of exchange rate changes on cash and cash equivalents

502,078



90,753

          Decrease in cash and cash equivalents


(15,554,292 )

161,940,031

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

 

$ 33,591,771

$

176,316,554

 

Supplemental disclosure of cash information

 





 

 

 

   Cash paid for:








         Income tax paid
$
387,893

$
-

Supplemental disclosure of other non-cash investing and financing activities







         Recognition of right-of-use assets and operating lease liabilities

$ 359,516


$ -

         Issuance of common stock for vested RSUs 

$
954,000


$
1,584,800


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

Amounts may not add due to rounding.

 

F-5

EVE HOLDING, INC.

(FORMERLY EVE UAM, LLC)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 Organization and Nature of Business


Eve Holding, Inc. (together with its subsidiaries, as applicable, “Eve,” “Eve Holding,” the “Company,” “we,” “us,” or “our”), is an aerospace company that 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 electric vertical take-off and landing (“eVTOL”) project, a comprehensive global services and support network, and a unique air traffic management solution. The Company is organized in Delaware with operations in Melbourne, Florida and São Paulo, Brazil.


The Company is a former blank check company incorporated on November 19, 2020, under the name Zanite Acquisition Corp. (“Zanite”) as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. 

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.  For transactions beyond the Business Combination (as defined below) and initial financing, ERJ and EAH are collectively referred to as “Embraer.”

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

Financing

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.

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 became the historical financial statements of the Company. The assets, liabilities, and results of operations of Zanite were consolidated with Eve Sub beginning on the Closing date. For accounting purposes, these 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 Business Combination are presented as those of Eve Sub. 

Both Embraer and Zanite’s sponsors incurred costs in connection with the business combination (“Transaction Costs”). The Transaction Costs that were determined to be directly attributable and incremental to the Company, and as the primary beneficiary of these expenses, 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. 

As a result of the Closing, EAH did not lose control over Eve Sub because EAH held approximately 90% of Eve Holding’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
 

The Company’s unaudited condensed consolidated financial statements included in this report reflect (i) the historical operating results of Eve Sub prior to the Business Combination on May 9, 2022, prepared on a carve-out basis, (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 retroactive recast of the equity structure recapitalization including EPS for all periods presented.

Until the Closing date on May 9, 2022, the 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 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.

The accompanying condensed consolidated financial statements are presented in US Dollars, 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 Securities Exchange Commission (“SEC”) for interim financial reporting.

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 normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position, results of operations, and cash flows for the periods presented. All intercompany balances and transactions were eliminated in consolidation. Certain columns and rows may not add due to rounding.

Note 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 six months ended June 30, 2023.


Change in Carve-Out Methodology

Prior to the separation from Embraer, Eve Sub has historically operated as part of Embraer and not as a standalone company. Therefore, a carve-out methodology was necessary to prepare historical financial statements since Eve Sub’s inception in 2017 until the Closing on May 9, 2022. For reporting periods prior to and for the year ended December 31, 2021, the management approach was used as the carve-out methodology. The management approach takes into consideration the assets that were 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.

The Master Service Agreement (“MSA”) and Shared Service Agreement (“SSA”) were executed on December 14, 2021. Beginning January 1, 2022, Embraer started charging Eve Sub for most of the expenses Eve Sub previously carved out. Refer to Note 5 – Related Party Transactions for information regarding these agreements. On the Closing date, Embraer concluded that all relevant assets and liabilities were contributed to Eve Sub. Based on the direct charges under the MSA and SSA and the transfer of assets and liabilities to Eve Sub, the Company determined it to be appropriate to change the carve-out methodology to the legal entity approach.  The legal entity approach is often appropriate in circumstances when the transaction structure is aligned with the legal entity structure of the divested entity.  The Company applied the legal entity approach beginning January 1, 2022 until the Closing date May 9, 2022. For activity after the Closing date, no carve-out adjustments were necessary in preparation of Eve’s condensed consolidated financial statements. 

The Company has recorded the impacts of the change in carve-out methodology from the management approach to the legal entity approach  as adjustments (“Separation-Related Adjustments”) to the January 1, 2022 beginning balance sheet and not as a period activity attributable to the twelve month 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


Adjustments


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


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 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 that is not an emerging growth company or is 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 (“US Dollars,” “USD,” or “$”) is the functional and reporting currency of Eve. The balances and transactions of Eve Soluções de Mobilidade Aérea Urbana Ltda. ("Eve Brazil"), a direct wholly owned subsidiary of Eve based in Brazil, that were recorded in a Brazilian reais (“BRL” or “R$”) have been translated into the functional currency (USD) before being presented in the condensed consolidated financial statements.

 

Foreign currency gains and losses are related to transactions with suppliers recognized in USD, but settled in BRL. The financial impact is recognized in “Other financial gain/(loss), net” within the condensed consolidated statements of operations.

 

Prior Period Reclassification


We have reclassified certain prior period amounts to conform to the current period presentation. Exchange rate effects due to translation were reclassified from line items within “Changes in operating assets and liabilities” to “Unrealized gain on exchange rate translation” and “Effect of exchange rate changes on cash and cash equivalents” within the condensed consolidated statements of cash flows.


Use of Estimates

The preparation of condensed 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 7 for additional information.  

 

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 condensed consolidated financial statements and related disclosures.


F-9


Cash and cash equivalents include deposits in Bank Deposit Certificates (“CDB’s”) issued by financial institutions in Brazil that are immediately available for redemption and fixed term deposits in US Dollars with original maturities of 90 days or less.  Balances consisted of the following:




 June 30,

December 31,



2023



2022

Cash 
$ 23,392,996

$ 14,446,534
CDBs

5,185,486


4,483,260
Fixed deposits

5,013,289



30,216,269

Total

$ 33,591,771

$ 49,146,063

  


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. 


June 30, 2023
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
HTM securities, at cost:
Time deposits $ 150,782,326 $ - $ (603,760 ) $ 150,178,566

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


No allowance for credit losses were recognized as of June 30, 2023 and December 31, 2022.


Note 5 – Related Party Transactions

Relationship with Embraer

Prior to the Closing of the transaction with Zanite, Eve Sub was managed, operated, and funded by Embraer. Accordingly, certain shared costs have been allocated to Eve and reflected as expenses in Eve's stand-alone condensed consolidated financial statements. In December 2021, Embraer started charging 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. The expenses reflected in the condensed consolidated financial statements may not be indicative of expenses that will be incurred by Eve in the future.


Corporate Costs  Embraer incurs corporate costs for services provided to Eve. These costs include, but are not limited to, expenses for information systems, accounting, treasury, purchasing, human resources, legal, and facilities. These costs benefit Eve, but are not covered under the MSA or SSA.  The corporate costs are allocated to the “Research and development” and “Selling, general and administrative” line items of the condensed consolidated statements of operations as appropriate. 


Transaction Costs  During the six months period ended June 30, 2022, Embraer paid for Transaction Costs attributable to Eve Sub. The Transaction Costs comprise, but were not limited to, costs associated with legal, finance, 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.

 

Master Service Agreement and Shared Service Agreement  In connection with the transfer of the assets and liabilities of the UAM business to Eve Sub, Embraer and Eve Sub entered into the 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 established a fee so that Eve may have access to Embraer’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 established a cost overhead pool to be allocated, excluding any margin, so that Eve may be provided with access to certain of Embraer’s administrative services and facilities such as 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) (“Atech”) and wholly owned subsidiary of Embraer, 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.

 

Fees and expenses in connection with the MSA are set to be payable within 45 days after receipt of the invoice by Eve together with documentation supporting the fees and expenses. 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. Services provided under the MSA and SSA are recognized in Related party payables within the condensed consolidated balance sheets.

 

Related Party Receivables and Payables  Certain employees have transferred from Embraer to Eve. On the transfer date of each employee, all payroll related accruals for the employee are transferred to Eve.  Embraer is responsible for payroll related costs prior to the transfer date. Eve recognizes a related party receivable from Embraer for payroll costs incurred prior to the transfer date. Additionally, Embraer transferred certain liabilities related to the Eve business, which led to the recognition of a receivable from EAH. This receivable balance is decreased when Embraer pays for corporate expenses (e.g., health insurance) on behalf of Eve.

 

Royalty-Free Licenses  Under the MSA and SSA, Eve has a royalty-free license to access Embraer’s intellectual property to be used within the UAM market. 


Leases  Eve enters into agreements with Embraer to lease corporate office space and other facilities.  Refer to Note 17.


Related Party Loan  On August 1, 2022, the Company entered into a loan agreement (the “Loan Agreement”) with EAH, a wholly owned U.S. subsidiary of Embraer, in order to efficiently manage the Company’s cash at a rate of return that is favorable to the Company. Pursuant to the Loan Agreement, the Company agreed to lend to Embraer an aggregate principal amount of up to $81,000,000 at an interest rate of 4.89% per annum. All unpaid principal and any accrued and unpaid interest thereon, shall be due and payable on August 1, 2023. The date may be extended upon mutual written agreement by the Company and Embraer. 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. The Company may request full or partial prepayment of any outstanding principal amount under the Loan Agreement at any time.

 

The following table summarizes the related party expenses for the period:

 



 Three Months Ended June 30,

 Six Months Ended June 30,



2023



2022



2023



2022

Research and development
$ 17,272,278


$ 8,576,919


$ 32,408,255


$ 16,228,568

Selling, general and administrative

973,156



6,632,200



1,492,701



7,745,679

Total

$
18,245,434


$
15,209,119


$
33,900,956


$
23,974,247



Other Current Assets


Other current assets are comprised of the following:



June 30,

December 31,


2023


2022


Prepaid Directors & Officers insurance

$
1,166,293


$
1,292,317

Advances to employees



229,200




74,064


Income tax advance payments (i)


46,603



34,642

Other assets


19,857



24,484

Total


$

1,461,953



$

1,425,507



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


Property Plant and Equipment

Property, plant and equipment consisted of the following:





June 30,


December 31,


2023



2022


Development mockup


$

418,722



$

418,722


Leasehold improvement

165,380



-

Construction in progress ("CIP")


-



44,375

Computer hardware


13,368



13,368

Total property, plant and equipment

$

597,470


$

476,465


Less: Accumulated depreciation


(83,637
)

(24,879
)
Total property, plant and equipment, net
$
513,833


$
451,586

The mockup was built to simulate the operation, design, interior space, and cabin layout of our eVTOL. Depreciation expense for the three months ended June 30, 2023 and 2022 was $36,709 and $0, respectively. Depreciation expense for the six months ended June 30, 2023 and 2022 was $58,759 and $0, respectively. During the three month period ended June 30, 2023, the Company derecognized CIP assets associated with the terminated lease described in Note 17. The expense is recognized in the "Selling, general and administrative" line of the condensed consolidated statement of operations.


Other Payables


Other Payables are comprised of the following items:




June 30,

December 31,


2023


2022


Payroll accruals
$
3,478,351

$ 4,075,660
Accrued expenses

2,304,112


2,491,847

Advances from customers (i)



1,050,000




800,000


Other payable



546,014




300,738


Income tax payable


113,382



-

Total


$

7,491,859



$

7,668,245


Current portion


$

5,961,337



$

6,648,171


Non-current portion


$

1,530,522



$

1,020,074



(i) Refers to advances from customers who have signed non-binding Letters of Intent to purchase eVTOLs.


Note 7  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 million (approximately $102 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 June 30, 2023.

 

The first line of credit (“Sub-credit A”), in the amount of R$80 million (approximately $17 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 million (approximately $86 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 million (approximately $428,000) 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 June 30, 2023, Eve has not drawn from the lines of credit.

 

F-13

 

Note 8  Derivative Financial Instruments


During the second quarter of 2022, Eve began to consolidate Zanite’s assets and liabilities, which included derivative financial instruments related to the Private Placement Warrants. As of June 30, 2023 and December 31, 2022, the fair value of liability related to these derivative financial instruments was $12,541,425 and $3,562,500, respectivelyThe increase in the fair value of the liability was recognized as expense within the “Change in fair value of derivative liabilities” line in the condensed consolidated statement of operations.  Refer to Note 9 and 11 for additional information. 

 

Note 9  Fair Value Measurement 

 

The following table lists the Company’s financial assets and liabilities by level within the fair value hierarchy. The Company’s assessment of the significance of an input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Level 1 refers to fair values determined based on unadjusted quoted prices in active markets for identical assets or liabilities. ​Level 2 refers to fair values estimated using other observable inputs for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.  ​Level 3 includes fair values estimated using unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available. 


The Company classifies its Private Placement Warrants as Level 2 because they are valued using observable, unadjusted quoted prices in active markets for similar liabilities, the Company’s Public Warrants, which have similar key terms. Refer to Note 8 and 11 for additional information.

 

During the three and six months ended June 30, 2023 and 2022, there were no changes in the fair value methodology and no transfers between levels of the financial instruments.

 




June 30,



December 31,




2023



2022

 



Level 2

 


Level 2

 

Liabilities





 


 

 

Private Placement Warrants 
$ (12,541,425
)
$

(3,562,500

)

The position and changes in fair value of the Private Placement Warrants for the period ended June 30, 2023 were as follows:




Private Placement Warrants
Balance as of December 31, 2022
$

3,562,500


Change in fair value


8,978,925

Balance as of June 30, 2023
$
12,541,425


The Public Warrants were previously classified as liabilities.  On the Closing date of May 9, 2022, the Public Warrants were remeasured at fair value and reclassified to equity.  Refer to Note 11 for additional information.

 

F-14

 

Note 10 – Stockholders’ Equity

 

The Company’s common stock and warrants trade on the NYSE under the symbols “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 269,163,921 and 269,094,021 shares of common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively. The Company has retroactively adjusted the shares issued and outstanding prior to May 9, 2022, to give effect to the exchange ratio. 

 

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 June 30, 2023, and the Company does not expect to pay dividends in the foreseeable future. 

 

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

 

2022 Stock Incentive Plan 

16,562,821


Shares underlying Private Placement Warrants

14,250,000


Shares underlying Public Warrants

11,500,000


Shares underlying New Warrants

37,572,536


 

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 anti-takeover defense. As of June 30, 2023 and December 31, 2022, there was no preferred stock issued and outstanding. 

 

In the event of a 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, if any.

 

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 and will terminate on the earlier of five years after the Closing date, the date fixed by the Company to redeem all of the warrants, or the liquidation of the Company.

Warrants Classified as Equity

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 stock would receive cash. Additionally, the Public Warrants are indexed to the Company’s own stock. Thus, at the Closing, the Public Warrants valued at $10,580,000 were reclassified from liability to equity. 

New Warrants

The Company has entered into warrant agreements with certain 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 ("Penny Warrants"), (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. Warrants with exercise prices of $15.00 and $11.50 per share are defined as Market Warrants.

 

Because the cash received for the common stock 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 recognized, measured, and classified by the Company as follows: 

(a) Potential lender/financier: Market Warrants were issued to potential lender/financier counterparties at Closing, vested immediately, and do not contain exercise contingencies. These warrants were determined to be within the scope of ASC 815, Derivatives and Hedging, and equity-classified. Fair value was measured at the issuance date and recognized as New Warrants expense. As long as these warrants continue to be classified as equity, subsequent fair value remeasurement is not required. 

(b) Potential customers: Market and Penny Warrants issued or issuable to potential customers of Eve were determined to be within the scope of ASC 718, Compensation-Stock Compensation, for classification and measurement and ASC 606, Revenue from Contracts with Customers, for recognition. In accordance with ASC 718, these warrants were determined to be equity-classified. The Penny 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. The Vested Warrants were accounted for akin to a non-refundable upfront payment to a potential customer and were recognized as New Warrants expense as Eve has no current revenue or binding contracts in place. Market Warrants issued at Closing to potential customers vested immediately and have no contingencies.

(c) Potential suppliers: Penny 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 New Warrants were measured at fair value on the grant date (May 9, 2022), except for cases where there has been a modification, where fair value is remeasured on the modification date. The fair value of Penny Warrants were calculated by subtracting $0.01 from Eve’s share price on the grant date. Market Warrants with an exercise price of $11.50 were estimated using the publicly traded Public Warrants as the terms are similar. The Company used a modified Black-Scholes model to value the Market Warrants with an exercise price of $15.00. The valuation model utilizes 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 following table summarizes the Black-Scholes model inputs and assumptions:

 

 

 

 

 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. 

Warrants Classified as Liabilities

Private Placement Warrants

Each Private Placement Warrant entitles its holder to purchase one share of common stock at an exercise price of $11.50 per share, subject to conditions as defined in the Warrant Agreement.  The Private Placement Warrants have similar terms as the Public Warrants, except for the $0.01 cash redemption feature.  However, in the event a Private Placement Warrant is transferred to a third-party not affiliated with the Sponsor (referred to as a non-permitted transferee), the warrant becomes a Public Warrant and is subject to the $0.01 cash redemption feature. If this occurs, the calculation changes for the settlement amount of the Private Placement Warrants. Since the settlement amount depends solely on who holds the instrument, which is not an input to the fair value of a fixed-for-fixed option or forward on equity shares, the Private Placement Warrants are classified as a liability.

 


On May 5, 2023, the Company granted 358,990 restricted stock units (“RSUs”) to executives and eligible employees under the 2022 Stock Incentive Plan ("the Plan"). These RSUs had a grant date fair value of $7.41 per unit. The RSUs granted this quarter under the Plan will generally vest and settle in common stock (on a one-for-one basis) one to three years after the grant date. Awards with a one-year vesting periods contain performance conditions.  Annually, the Board of Directors determine the vesting conditions for the awards granted, subject to the conditions established in the Plan.


Note 13  Earnings Per Share


Basic and diluted earnings per common share are computed by dividing net income/(loss) for the period by the weighted average number of shares outstanding during the period.  

 


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022



2023


2022

Net loss 


$ (31,410,026 )
$

(107,221,565

)
$ (57,182,008 )
$ (117,231,573 )
Weighted-average shares outstanding - basic and diluted

275,632,354


248,989,790

275,563,187


234,574,977

Net loss per share basic and diluted


$
(0.11 )
$

(0.43

)
$ (0.21 )
$ (0.50 )

For the three months ended June 30, 2023 and 2022, the basic and diluted weighted-average shares outstanding included penny warrants not yet exercised of 6,600,000 and 6,400,000, respectively. For the six months ended June 30, 2023 and 2022, the basic and diluted weighted-average shares outstanding included penny warrants not yet exercised of 6,600,000 and 6,400,000 respectively.    

The following table presents the number of shares excluded from the calculation of diluted net loss per share as their effect would have been anti-dilutive: 




June 30,



2023


2022

Unvested restricted stock units
1,133,095


427,235

Penny warrants subject to unmet contingencies

13,972,536


11,450,000

Warrants "out of the money"

42,750,000



42,750,000

Total
57,855,631


54,627,235

 

F-18


Note 14 Research and Development


Research and development expenses consist of the following



Three Months Ended June 30,


Six Months Ended June 30,



2023



2022



2023


2022

Outsourced service (i)
$ 20,063,536


$ 8,812,089


$ 39,500,865


$
16,957,952

Payroll costs



1,662,937



1,554,360



3,698,721



2,310,728

Other expenses



94,782



50,829



150,007



263,285

Total


$ 21,821,255


$ 10,417,278


$ 43,349,593


$ 19,531,965

 

(i) For the three months ended June 30, 2023 and 2022, $17,233,228 and $8,329,134 and for the six months ended June 30, 2023 and 2022 $32,322,056 and $