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 SeptemberJune 30, 20202023
Or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto
Commission File No. 001-39704
ZANITE ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
EVE HOLDING, INC.
| (Exact name of registrant as specified in its charter) |
Delaware | 85-2549808 | |
(State or other jurisdiction of
| (I.R.S. Employer
|
25101 Chagrin Boulevard, Suite 350
Cleveland, Ohio 44122
(Address of Principal Executive Offices, including zip code)
(216) 292-0200
1400 General Aviation Drive
Melbourne, FL 32935
(Address of Principal Executive Offices, including zip code)
(321) 751-5050
(Registrant’s telephone number, including area code)
N/A
(Former name formerand address, and former fiscal year, 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, | ||||
| $0.001 per share Warrants, each whole warrant exercisable for one share of | EVEX EVEXW | The 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 December 23, 2020August 8, 2023, there were 23,000,000 269,163,921shares of Class A common stock, and 5,750,000 shares of Class B common stock, $0.0001 par value $0.001 per share, issued and outstanding.
ZANITE ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2020EVE HOLDING, INC.
TABLE OF CONTENTS(FORMERLY EVE UAM, LLC)
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.
EVE HOLDING, INC.
(FORMERLY EVE UAM, LLC)
| 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.
EVE HOLDING, INC.
(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.
| 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 | ||||||||||||
i
ZANITE ACQUISITION CORP.
SEPTEMBER 30, 2020
(Unaudited)
ASSETS | ||||
Deferred offering costs | $ | 132,852 | ||
|
| |||
TOTAL ASSETS | $ | 132,852 | ||
|
| |||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||
Current liabilities | ||||
Accrued expenses | $ | 1,000 | ||
Accrued offering costs | 47,852 | |||
Promissory notes — related party | 60,000 | |||
|
| |||
Total Current Liabilities | 108,852 | |||
|
| |||
Commitments | ||||
Stockholder’s Equity | ||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | |||
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; none issued and outstanding | — | |||
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding(1) | 575 | |||
Additional paid-in capital | 24,425 | |||
Accumulated deficit | (1,000 | ) | ||
|
| |||
Total Stockholder’s Equity | 24,000 | |||
|
| |||
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY | $ | 132,852 | ||
|
|
|
The accompanying notes are an integral part of the unauditedthese condensed consolidated financial statements.
ZANITE ACQUISITION CORP.EVE HOLDING, INC.
(FORMERLY EVE UAM, LLC)
CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF OPERATIONSCASH FLOWS
FOR THE PERIOD FROM AUGUST 7, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020(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 | ||||
(Unaudited)
Formation and operating costs | $ | 1,000 | ||
|
| |||
Net Loss | $ | (1,000 | ) | |
|
| |||
Weighted average shares outstanding, basic and diluted (1) | 5,750,000 | |||
|
| |||
Basic and diluted net loss per common share | $ | (0.00 | ) | |
|
|
|
The accompanying notes are an integral part of the unauditedthese condensed consolidated financial statements.
ZANITE ACQUISITION CORP.EVE HOLDING, INC.
(FORMERLY EVE UAM, LLC)
FOR THE PERIOD FROM AUGUST 7, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
(Unaudited)
| Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholder’s | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
Balance — August 7, 2020 (inception) | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
Issuance of Class B common stock to Sponsor(1) | 5,750,000 | 575 | 24,425 | — | 25,000 | |||||||||||||||
Net loss | — | — | — | (1,000 | ) | (1,000 | ) | |||||||||||||
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| |||||||||||
Balance — September 30, 2020 | 5,750,000 | $ | 575 | $ | 24,425 | $ | (1,000 | ) | $ | 24,000 | ||||||||||
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The accompanying notes are an integral part of the unaudited condensed financial statements.
ZANITE ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 7, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
(Unaudited)
Cash Flows from Operating Activities: | ||||
Net loss | $ | (1,000 | ) | |
Changes in operating assets and liabilities: | ||||
Accrued expenses | 1,000 | |||
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| |||
Net cash used in operating activities | — | |||
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| |||
Net Change in Cash | — | |||
Cash – Beginning | — | |||
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Cash – Ending | $ | — | ||
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Supplemental disclosure of non-cash investing and financing activities: | ||||
Deferred offering costs paid directly by Sponsor in exchange for the issuance of Class B common stock | $ | 25,000 | ||
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Deferred offering costs included in accrued offering costs | $ | 47,852 | ||
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Deferred offering costs paid through promissory note | $ | 60,000 | ||
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The accompanying notes are an integral part of the unaudited condensed financial statements.
Note 1– Organization and Nature of Business
SEPTEMBER 30,
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,
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
under the name Zanite Acquisition Corp. (the “Company”(“Zanite”) was incorporated inas a Delaware on August 7, 2020. The Company wascorporation 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 (a “Business Combination”).businesses.
The Company is notBusiness 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 toliability company (“Eve Sub”), a particular industry or sectorformer subsidiary of EAH, that was formed for purposes of consummating aconducting the UAM business. For transactions beyond the Business Combination. The Company is an early stageCombination (as defined below) and emerging growth companyinitial financing, ERJ and EAH are collectively referred to as such,“Embraer.”
On May 9, 2022, the Company is subject to allclosing (the “Closing”) of the risks associated with early stage and emerging growth companies.
As of September 30, 2020,transactions contemplated by the Company had not commenced any operations. All activity for the period from August 7, 2020 (inception) through September 30, 2020 relatesBCA occurred (“Business Combination”). Pursuant to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completionBCA, Zanite issued 220,000,000 shares of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on November 16, 2020. On November 19, 2020, the Company consummated the Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A common stock includedto EAH in the Units sold, the “Public Shares”), which includes the full exercise by the underwritersexchange for all of the over-allotment optionissued 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 purchase an additional 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000, which is described“Eve Holding, Inc.”
Financing
On December 21, 2021, December 24, 2021, March 9, 2022, March 16, 2022, and April 4, 2022, in Note 3.
Simultaneouslyconnection with the closing ofBusiness Combination, Zanite entered into subscription agreements or amendments thereto (as amended from time to time, the Initial Public Offering, the Company consummated the sale of 9,650,000 warrants“Subscription Agreements”) with certain investors, including certain strategic investors and/or investors with existing relationships with ERJ (the “Private Placement Warrants”“Strategic Investors”) at a price of $1.00 per Private Placement Warrant in a private placement to, Zanite Sponsor LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceedsand EAH (collectively, the “PIPE Investors”), pursuant to which and on the terms and subject to the conditions of $9,650,000, which, is describedZanite agreed to issue and sell to the PIPE Investors in Note 4.
Transaction costs amountedprivate placements to $13,143,093, consistingclose immediately prior to the Closing, an aggregate of $4,600,00035,730,000 shares of underwriting fees, $8,050,000Class A common stock at a purchase price of deferred underwriting fees and $493,093$10.00 per share, for an aggregate purchase price of other offering costs. In addition, on November 19, 2020, cash of $2,750,000 was held outside$357,300,000, which included the commitment of the Trust Account (as defined below)Sponsor to purchase 2,500,000 shares of Class A common stock for a purchase price of $25,000,000 and is availablethe 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 paymentnet monetary assets of offering costsZanite accompanied by a recapitalization. Accordingly, the consolidated assets, liabilities, and for working capital purposes.
Followingresults of operations of Eve Sub became the closinghistorical financial statements of the Initial Public OfferingCompany. The assets, liabilities, and results of operations of Zanite were consolidated with Eve Sub beginning on November 19, 2020, an amount of $232,300,000 ($10.10 per Unit) from the net proceedsClosing date. For accounting purposes, these financial statements of the saleCompany represent a continuation of the Units infinancial 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 Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination are presented as those of Eve Sub.
Both Embraer and (ii) the distribution of the funds held in the Trust Account, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i)Zanite’s sponsors incurred costs in connection with a stockholder meeting calledthe business combination (“Transaction Costs”). The Transaction Costs that were determined to approvebe 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 (ii) by meansa reduction of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceedcash contributed with a Business Combinationcorresponding reduction of additional paid-in capital if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favorthey were attributable to one or multiple sub-transactions of the Business Combination. If
As a stockholder vote isresult of the Closing, EAH did not required by applicable law or stock exchange listing requirements andlose control over Eve Sub because EAH held approximately 90% of Eve Holding’s shares immediately after the Company doesClosing. Therefore, the transaction did not decide to holdresult in a stockholder vote forchange in control that would otherwise necessitate business or other reasons,combination accounting.
The Company’s unaudited condensed consolidated financial statements included in this report reflect (i) the Company will, pursuant to its Amended and Restated Certificatehistorical operating results of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuantEve Sub prior to the tender offer rulesBusiness 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 U.S. Securitiesequity 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 Exchange Commission (“SEC”)expenses that management determined to be specifically attributable to Eve Sub, as well as allocations of certain corporate level assets, liabilities and file tender offer documents withexpenses, deemed necessary to fairly present the SEC prior to completing a Business Combination. If, however, stockholder
ZANITE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
approvalfinancial position, results of operations and cash flows of Eve, as discussed further below. Management believes that the transaction is required by applicable law or stock exchange listing requirements, orassumptions used as basis for the Company decides to obtain stockholder approval for business or other reasons,allocations of expenses, direct and indirect, as well as assets and liabilities in the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have until May 19, 2021 to consummate a Business Combination.condensed consolidated financial statements are reasonable. However, if the Company anticipates that itthese allocations may not be able to consummate a Business Combination by May 19, 2021, the Company may, by resolution of its board of directors if requested by the Sponsor, extend the period of time the Company will have to consummate a Business Combination up to two times, each by an additional 6 months (until May 19, 2022), subject to the sponsor purchasing additional Private Placement Warrants. The Company’s stockholders will not be entitled to vote on or redeem their shares in connection with any such extension. Pursuant to the termsindicative of the Certificate of Incorporation, in order to extend the period of time to consummate a Business Combination in such a manner, the Sponsor, upon no less than five days’ advance notice prior to the applicable deadline, must purchaseactual amounts that would have been recorded had Eve operated as an additional 2,300,000 Private Placement Warrants, at a price of $1.00 per warrant and deposit the $2,300,000 in proceeds into the Trust Account on or prior to the date of the applicable deadline, for each 6 month extension. In the event that the Company receives notice from the Sponsor five days prior to the applicable deadline of its wishindependent, publicly traded company for the Company to effect an extension, the Company intends to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, the Company intends to issue a press release the day after the applicable deadline announcing whether or not the funds have been timely deposited. Our sponsor has the option to accelerate its purchase of one or both halves of the up to 4,600,000 Private Placement Warrants at any time following the closing of the Initial Public Offering and prior to the consummation of the Business Combination with the same effect of extending the time the Company will have to consummate a Business Combination by 6 or 12 months, as applicable.periods presented.
In addition to the Sponsor’s ability to extend the Company’s deadline to consummate a Business Combination in 6-month increments by purchasing additional Private Placement Warrants as described above, the Company may also hold a stockholder vote at any time to amend the Certificate of Incorporation to modify the amount of time the Company will have to consummate a Business Combination. The Sponsor and the Company’s executive officers, directors and director nominees have agreed that they will not propose any such amendment unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (net of permitted withdrawals), divided by the number of then outstanding Public Shares. As used herein, “Combination Period” refers to (i) the 6-month period from the closing of the Initial Public Offering in which the Company must complete a Business Combination, (ii) the 12- or 18-month period from the closing of the Initial Public Offering in which the Company must complete a Business Combination if the Sponsor has extended the period of time for the Company to consummate a Business Combination by purchasing additional Private Placement Warrants, and (iii) such other time period in which the Company must consummate a Business Combination pursuant to an amendment to the Certificate of Incorporation.
If the Company has not completed a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
ZANITE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the amount initially deposited into the Trust Account ($10.10).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.10 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.10 per public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited 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”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the accounting and disclosure rules and regulations of the SECSecurities Exchange Commission (“SEC”) for interim financial reporting.
Accordingly, they do not include all of the information and footnotes necessarynotes 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 complete presentationfull 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, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results 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.
The accompanying unaudited condensedinformation presented under Debt updates our Significant Accounting Policies information presented in our 2022Form 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 should be readsince Eve Sub’s inception in conjunction with2017 until the Company’s prospectus for its Initial Public Offering as filed with the SECClosing on November 16, 2020, as well as the Company’s Current Reports on Form 8-K, as filed with the SEC on November 19, 2020May 9, 2022. For reporting periods prior to and November 25, 2020. The interim results for the period from August 7, 2020 (inception) through September 30, 2020 are not necessarily indicative of the results to be expected for the year endingended December 31, 2020 or2021, 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 any future periods.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.
In connectionThe 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 Company’s assessmentlegal entity structure of going concern considerationsthe 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 accordance with ASU 2014-15, “Disclosurespreparation of Uncertainties about an Entity’s AbilityEve’s condensed consolidated financial statements.
The Company has recorded the impacts of the change in carve-out methodology from the management approach to Continuethe legal entity approachas adjustments (“Separation-Related Adjustments”) to the January 1, 2022 beginning balance sheet and not as a Going Concern,” as of September 30, 2020, management has determined that if the Company is unable to complete a Business Combination during the Combination Period (as defined in Note 1), then the Company will cease all operations except for the purpose of liquidating. The mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been madeperiod activity attributable to the carrying amountstwelve 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)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-OxleySarbanes-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.
ZANITE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Further, Section 102(b)(1)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 whichthat is neithernot an emerging growth company noror is an emerging growth company whichthat 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 conformityaccordance with U.S. GAAP requires the Company’s management to make estimates and assumptionsjudgments that affectaffected the reported amounts of assets and liabilities and disclosureallocations of contingent assetsexpenses. These judgments were based on the historical experience, management’s evaluation of trends in the industry and liabilitiesother factors that were deemed relevant at the date of the financial statementsthat time. The estimates and assumptions were reviewed on a regular basis and the reported amounts of revenues and expenses during the reporting period.
Makingchanges to accounting estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could changewere recognized in the near term due to one or more future confirming events. Accordingly,period in which the estimates were revised. The Company’s management recognize that the actual results could differ significantlybe materially different from thosethe 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.
Cash and Cash EquivalentsDebt
The Company considers all short-term investmentsOn 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 threeany 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.
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, when purchased to be cash equivalents. The Company did not have any cash equivalentsbut 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 SeptemberJune 30, 2020.2023 and December 31, 2022.
Note 5 – Related Party Transactions
Deferred Offering CostsRelationship with Embraer
OfferingPrior to the Closing of the transaction with Zanite, Eve Sub was managed, operated, and funded by Embraer. Accordingly, certain shared costs consist of legal, accounting, underwriting,have been allocated to Eve and otherreflected as expenses incurredin 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 balance sheet dateMaster 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 CostsEmbraer 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 CostsDuring 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 Initial Public Offering. Offering costs amounting to $13,143,093anticipated closing of the transaction with Zanite were capitalized and the remaining expenses were charged to stockholder’s equity upon the completionstatement of operations as SG&A expenses.
Master Service Agreement and Shared Service AgreementIn connection with the transfer of the Initial Public Offering (see Note 1). As of September 30, 2020, there were $132,852 of deferred offering costs recorded in the accompanying condensed balance sheet.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax 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 change in tax rates is recognized in incomefee 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 period that included the enactment date. Valuation allowances arefuture. The SSA established when necessary, to reduce deferred tax assets to the amount expecteda cost overhead pool to be realized.
ASC 740 prescribesallocated, 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 recognition thresholdMSA with Atech Negócios em Tecnologias S.A., a Brazilian corporation (sociedade anônima) (“Atech”) and a measurement attributewholly owned subsidiary of Embraer, for an initial term of 15 years (the “Atech MSA”). Fees under the financial statement recognition and measurement of tax positions taken or expectedAtech MSA are charged to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penaltiesEve for services related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefitsAir Traffic Management, defense systems, simulation systems, engineering, and no amounts accrued for interestconsulting services.
Fees and penalties as of September 30, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company is subject to income tax examinations by major taxing authorities since inception.
ZANITE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Net Loss per Common Share
Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture. At September 30, 2020, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 23,000,000 Units, which includes the full exercise by the underwriters of their option to purchase an additional 3,000,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 9,650,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant or $9,650,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Private Placement Warrants.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
The Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 5,750,000 shares of Class B common stock (the “Founder Shares”). The Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. As a result of the underwriter’s election to fully exercise their over-allotment option, the Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
ZANITE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Administrative Services Agreement
The Company entered into an administrative services agreement, commencing on November 19, 2020 through the earlier of the Company’s consummation of a Business Combination or its liquidation, to pay to the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to members of the Company’s management team.
Promissory Notes — Related Party
On August 7, 2020, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. As of September 30, 2020, there was $60,000 outstanding under the Promissory Note. The outstanding balance under the Promissory Note of $93,093 was subsequently repaid on November 23, 2020.
Related Party Loans
In order to finance transaction costsexpenses in connection with a Business Combination, the Sponsor or an affiliateMSA are set to be payable within 45 days after receipt of the Sponsor, or certain ofinvoice by Eve together with documentation supporting the Company’s officersfees and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determinedexpenses. Costs and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, 2020, no amounts were outstanding under the Working Capital Loans.
NOTE 6. COMMITMENTS
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration and Stockholder Rights
Pursuant to a registration rights agreement entered into on November 16, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filingprovision 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 PayablesCertain 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 LicensesUnder the MSA and SSA, Eve has a royalty-free license to access Embraer’s intellectual property to be used within the UAM market.
LeasesEve enters into agreements with Embraer to lease corporate office space and other facilities. Refer to Note 17.
Related Party LoanOn 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 such registration statements.outstanding principal amount under the Loan Agreement at any time.
Underwriting Agreement
The underwritersfollowing 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
| 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 a deferred feefederal withholding taxes and recoverable income taxes.
| 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 aggregate. "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.
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 deferredfirst 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 will become payableto 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 underwritersfirst 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 amounts heldlines of credit.
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, respectively. The increase in the Trust Account solelyfair value of the liability was recognized as expense within the “Change in fair value of derivative liabilities” line in the eventcondensed consolidated statement of operations.Refer to Note 9 and 11 for additional information.
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 tofair values determined based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 refers to fair values estimated usingother 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 completes a Business Combination, subjectCompany’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.
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 underwriting agreement.
NOTE 7. STOCKHOLDER’S EQUITY
Preferred Stock—TheAmended and Restated Certificate of Incorporation, the Company is authorized to issue 1,000,000the following shares and classes of preferredcapital stock, each with a par value of $0.0001$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 withon all matters to be voted upon by the stockholders.Holders of common stock are entitled to receive such designations, voting and other rights and preferencesdividends, if any, as may be determineddeclared from time to time by the Company’s boardBoard of directors. At SeptemberDirectors 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, 2020, there were no2023, 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 issuedwould be issuable for any proper corporate purpose, including, among other things, future acquisitions, capital raising transactions consisting of equity or outstanding.
ZANITE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBERconvertible 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, 2020
(Unaudited)
Class A Common Stock—The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2020,2023 and December 31, 2022, there werewas no shares of Class A common stock issued or outstanding.
Class B Common Stock—The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2020, there were 5,750,000 shares of Class B commonpreferred stock issued and outstanding.
Holders
In the event of Class A commona voluntary or involuntary liquidation, dissolution, distribution of assets, or winding-up, subject to preferences that may apply to any shares of preferred stock andoutstanding at the time, the holders of Class Bthe Company’s common stock will vote together as a single class onbe entitled to receive an equal amount per share of all matters submitted to a vote of our shareholders except as otherwise required by law.assets of whatever kind available for distribution to stockholders, after the rights of the holders of any preferred stock have been satisfied, if any.
The shares of Class B common stock will automatically convert into Class A common stock concurrently with or immediately followingBefore the consummation of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, areClosing, Zanite had issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal,11,500,000 redeemable warrants included in the aggregate, on an as-converted basis, 20%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 sumPublic and Private Placement Warrants started 30 days after the Closing and will terminate on the earlier of five years after the total number of all shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by Public Stockholders), includingClosing date, the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued,date fixed by the Company in connection withto redeem all of the warrants, or in relationthe liquidation of the Company.
| F-15 |
Warrants Classified as Equity
Public Warrants
Each Public Warrant entitles its holder to the consummationpurchase one share of a Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into sharesat an exercise price of Class A common stock issued, or$11.50 per share, to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of working capital loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
Warrants—Public Warrants mayexercised only be exercised for a whole number of shares. No fractional warrants will be issued upon separationshares of the Units and only whole warrants will trade.our common stock. The Public Warrants will becomebecame exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and willClosing (i.e., on June 8, 2022), provided that we have no obligation to settle such warrant exercise unless aan effective registration statement under the Securities Act covering the issuance of the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A 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 warrant exercise has beenshares are registered, qualified or deemed to be exempt from registration under the securities, or blue sky, laws of the state of residence of the registered holder of the warrants.
holder. The Company has agreed that as soon as practicable, but in no event later than 15 business daysPublic Warrants expire five years after the closing of a Business Combination,Closing or earlier upon redemption or liquidation. Once the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Companywe may redeem for cash the outstanding Public Warrants:
in whole and not in part;
Warrants at a price of $0.01 per Public Warrant;
upon not less than 30 days’ prior written notice of redemption to each warrant, holder; and
ZANITE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
if, and only if the closinglast sale price of theour common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day30 trading days period ending threeon the third business daysday 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 Companyhas 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.
If
(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 expenseas 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 expenseas 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 may exerciseand reviewed when circumstances change.
Warrants Classified as Liabilities
Private Placement Warrants
Each Private Placement Warrant entitles its redemption right even if it is unableholder to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and numberpurchase one share of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company completes a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00$11.50 per share, redemption trigger price will be adjusted (tosubject to conditions as defined in the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
Warrant Agreement. The Private Placement Warrants are identical tohave similar terms as the Public Warrants, underlyingexcept for the Units sold$0.01 cash redemption feature. However, in the Initial Public Offering, except that theevent a Private Placement WarrantsWarrant 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 Class A common stock issuable upon$0.01 cash redemption feature. If this occurs, the exercisecalculationchanges for the settlement amount of the Private Placement Warrants willWarrants. Since the settlement amount depends solely on who holds the instrument, which is not be transferable, assignable or saleable until 30 days afteran input to the completionfair value of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisablefixed-for-fixed option or forward on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. Ifequity shares, the Private Placement Warrants are heldclassified 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.
Basic and diluted earnings per common share are computed by someonedividing 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 | ) | ||||
| 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 | |||||
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 thesix months ended June 30, 2023 and 2022 $32,322,056and $15,665,298, were charged under the MSA contract, respectively. Refer to Note 5 for additional information regarding the MSA.
Selling, general and administrative expenses consist of the following:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
Payroll costs | $ | 2,409,072 | $ | 3,827,517 | $ | 5,127,169 | $ | 4,367,982 | ||||||||
Outsourced service (i) | 3,005,907 | 4,405,078 | 5,115,742 | 4,624,952 | ||||||||||||
| Director & Officers insurance | 557,404 | 646,158 | 1,559,815 | 646,158 | ||||||||||||
| Other expenses | 517,742 | 1,014,610 | 758,495 | 1,042,192 | ||||||||||||
Travel & entertainment | 142,981 | 154,203 | 226,204 | 175,048 | ||||||||||||
Transaction Costs | - | 5,681,367 | - | 6,190,634 | ||||||||||||
Total | $ | 6,633,106 | $ | 15,728,933 | $ | 12,787,425 | $ | 17,046,966 | ||||||||
Deferred income taxes are generally recognized, based on enacted tax rates, when assets and liabilities have different values for financial statement and tax purposes. Eve has calculated its income tax amounts using a separate return methodology. Under this method, Eve assumes it will file separate returns with tax authorities. As a result, Eve’s deferred tax balances and effective tax rate as a stand-alone entity will likely differ significantly from those recognized in historical periods. A valuation allowance is appropriate if it is more likely than not all or a portion of deferred tax assets will not be realized. The calculation of income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations.
The tax loss carryforwards and valuation allowances reflected in the condensed consolidated financial statements are based on a hypothetical stand-alone income tax return basis and may not exist in the ERJ and EAH consolidated financial statements.
Our consolidated effective income tax rate was (0.8)% and (0.1)% for the three months ended June 30, 2023, and 2022, respectively. For the six months ended June 30, 2023, Eve has recognized a current income tax expense of $476,735 due to a year-to-date income in the Brazilian jurisdiction. The tax rate for 2023 is primarily driven by a full valuation allowance against the Company’s deferred tax assets due to historical and current losses incurred.
Note 17 – Commitments and Contingencies
On August 2, 2021, Eve Brazil signed an agreement with Embraer to lease two facilities, one in São José dos Campos and other thanin Gavião Peixoto, both in the initial purchasersstate of São Paulo, Brazil. The leases never commenced and were terminated during the second quarter 2023.There were no costs associated with the lease termination.The Company signed two new leases with Embraer for different sites.The SãoJosé dos Campos lease site commenced on June 12, 2023. In connection with the lease commencement, a Right-of-use (“ROU”) asset $338,006 was recognized in the “Right-of-use assets, net” line of the condensed consolidated balance sheet. Operating lease liabilities of $77,531 and $260,475 were recognized in the “Other payables” and “Other non-current payables” lines of the condensed consolidated balance sheet, respectively. The lease for the other site has not commenced as of June 30, 2023.
Operating segment information is presented in a manner consistent with the internal reports provided to the Chief Operating Decision Makers (“CODMs”). Given Eve’s pre-revenue operating stage, it currently has no concentration exposure to products, services, or their permitted transferees,customers. Eve has determined that it currently operates in three different operating and reportable segments as the Private Placement WarrantsCODMs assess the operation results by each R&D project, as follows:
eVTOL Eve is designing and certifying an eVTOL purpose-built for UAM missions. Eve plans to market its eVTOLs globally to operators of UAM services, including fixed wing and helicopter operators, as well as lessors that purchase and manage aircraft on behalf of operators.
UATM Eve is developing a next-generation UATM system to help enable eVTOLs to operate safely and efficiently in dense urban airspace along with conventional fixed wing and rotary aircraft and unmanned drones. Eve expects to offer its UATM solution primarily as a subscription software offering to customers that include air navigation service providers, fleet operators and vertiport operators.
Service and Support Eve plans to offer a full suite of eVTOL service and support capabilities, including material services, maintenance, technical support, training, ground handling and data services. Its services will be redeemableoffered to UAM fleet operators on an agnostic basis, supporting both its own eVTOL and those produced by the Company and exercisable by such holders on the same basis as the Public Warrants.third parties.
NOTE 8. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date upCODMs receive information related to the date that the financial statements were issued. Other than as described in these financial statements, the Company didoperating results based on cost by each R&D project. Asset information by segment is not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
|
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Zanite Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and referencespresented to the “Sponsor” refer to Zanite Sponsor LLC. CODMs.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Research and development expenses | |||||||||||||||
| eVTOL | $ | 19,709,498 | $ | 8,180,999 | $ | 39,824,485 | $ | 15,885,150 | |||||||
| UATM | 1,149,515 | 1,365,309 | 1,860,888 | 2,775,845 | |||||||||||
| Service Support | 962,242 | 870,970 | 1,664,220 | 870,970 | |||||||||||
| Total | $ | 21,821,255 | $ | 10,417,278 | $ | 43,349,593 | $ | 19,531,965 | |||||||
The following discussion and analysis provide information that Eve's management believes is relevant to an assessment and understanding of the Company’s financial condition andEve's consolidated results of operations and financial condition. The following discussion should be read in conjunction with the 2022 Form-10-K/A filed with the U.S. Securities and Exchange Commission (the “SEC”) and the unaudited condensed consolidated financial statementsfor the three and six months ended June 30, 2023 and 2022, and the related notes thereto containedthat are included elsewhere in this Quarterly Report. Certain information contained in the Report on Form 10-Q. This discussion and analysis set forth below includescontains forward-looking statements based upon current expectations that involve risks and uncertainties.
Special The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and “Cautionary Note Regarding Forward-Looking StatementsStatements” in this Quarterly Report on Form 10-Q and in our other filings with the SEC.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements”on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.1995. All statements other than statements of historical fact includedfacts contained in this Quarterly Report on Form 10-Q, including, without limitation, statements in this “Management’sunder Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’sour financial position, business strategy and the plans and objectives of management for future operations,operations. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or similar terms or expressions or the negative thereof., but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek”These risks and variationsuncertainties include, but are not limited to, the following risks, uncertainties and similar words and expressions areother factors:
• | our ability to raise financing in the future; |
• | the impact of the regulatory environment and complexities with compliance related to such environment, including changes in applicable laws or regulations; |
• | the impact of public health crises and epidemics; |
• | our ability to implement and maintain an effective system of internal control over financial reporting; |
• | our ability to grow market share in our existing markets or any new markets we may enter; |
• | our ability to respond to general economic conditions; |
• | the impact of foreign currency, interest rate, exchange rate and commodity price fluctuations; |
• | our ability to manage our growth effectively; |
• | our ability to achieve and maintain profitability in the future; |
• | our ability to access sources of capital to finance operations and growth; |
• | the success of our strategic relationships with third parties; |
• | competition from other manufacturers and operators of electrical vertical take-off and landing vehicles and other methods of air or ground transportation; |
• | various environmental requirements; |
• | retention or recruitment of executive and senior management and other key employees; |
• | reliance on services to be provided by Embraer and other third parties; and |
• | other risks and uncertainties described in this Quarterly Report on Form 10-Q, including those under “Risk Factors” |
Overview
We are
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 formedincorporated on November 19, 2020, under the laws of the State ofname Zanite Acquisition Corp. (“Zanite”) as a Delaware on August 7, 2020corporation that was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combinationbusiness combination with one or more businesses.
Eve’s goal is to be a leading company in the urban air mobility ("UAM") market by taking a holistic approach to developing a UAM solution that includes: the design and production of electrical vertical take-off and landing vehicles (“eVTOLs”); a portfolio of maintenance and support services focused on Eve’s and third-party eVTOLs; and a new air traffic management system for eVTOLs, otherwise known as Urban Air Traffic Management (“UATM”) system designed to allow eVTOLs to operate safely and efficiently in dense urban airspace alongside conventional aircraft and drones. Eve’s mission is to bring affordable air transportation to all passengers, improve quality of life, unleash economic productivity, save passengers time and reduce global carbon emissions. Eve plans to leverage its strategic relationship with ERJ to de-risk and accelerate its development plans, while saving costs by utilizing ERJ’s extensive resources.
Eve’s Business Model
Eve plans to fuel the development of the UAM ecosystem by providing a complete portfolio of UAM solutions across four primary offerings:
eVTOL Production and Design. Eve is designing and certifying an eVTOL purpose-built for UAM missions. Eve plans to market its eVTOLs globally to operators of UAM services, including fixed wing and helicopter operators, as well as lessors that purchase and manage aircraft on behalf of operators.
Service and Support. Eve plans to offer a full suite of eVTOL service and support capabilities, including material services, maintenance, technical support, training, ground handling and data services. Its services will be offered to UAM fleet operators on an agnostic basis – supporting both its own eVTOL and those produced by third parties.
Urban Air Traffic Management. Eve is developing a next-generation UATM system to help enable eVTOLs to operate safely and efficiently in dense urban airspace along with conventional fixed wing and rotary aircraft and unmanned drones. Eve expects to offer its UATM solution primarily as a subscription software offering to customers that include air navigation service providers, fleet operators and vertiport operators.
To date, Eve has not generated any revenue, as it continues to develop its eVTOL vehicles and other UAM solutions. As a result, Eve will require substantial additional capital to develop products and fund operations for the foreseeable future. Until Eve can generate any revenue from product sales and services, it expects to finance operations through a combination of existing cash on hand, public offerings, private placements and debt financings. The amount and timing of future funding requirements will depend on many factors, including the pace and results of development efforts.
Master Service Agreements
EVE UAM, LLC, a Delaware limited liability company (“Eve Sub”) has entered into the Master Service with ERJ and the Atech MSA with Atech (collectively, the "MSAs"), a Service Agreement with the Brazilian Subsidiary and the SSA with ERJ, EAH and the Brazilian Subsidiary. Pursuant to the MSAs with ERJ and Atech, each of ERJ and Atech, either directly or through their respective affiliates, will provide certain services and products to Eve and its subsidiaries, including, among others, product development of eVTOL, services development, parts planning, technical support, AOG support, MRO planning, training, special programs, technical publications development, technical publications management and distribution, operation, engineering, designing and administrative services and, at Eve’s option, future eVTOL manufacturing services. Eve expects to collaborate with ERJ and leverage ERJ’s expertise as an aircraft producer, which will help it design and manufacture eVTOLs with low maintenance and operational costs and design systems and processes for maintenance, develop pilot training programs and establish operations. The services provided under the SSA include, among others, corporate and administrative services to Eve. In addition, Eve Sub has also entered into the Data Access Agreement with ERJ and the Brazilian subsidiary, pursuant to which, among other things, ERJ has agreed to provide the Brazilian Subsidiary with access to certain of its intellectual property and proprietary information in order to facilitate the execution of the specific activities that are set out in certain of the statements of work entered into pursuant to the Services Agreements.
The aforementioned Services Agreements continue to be in full force and effect. Further information about such agreements is set forth beginning on page 68 of our prospectus, dated January 18, 2023, filed on January 20, 2023, pursuant to Rule 424(b) under the Securities Act, relating to the Registration Statement on Form S-1/A, as amended (File No.333-265337) (the “Prospectus”), in the section entitled “Material Agreements”.
Key Factors Affecting Operating Results
For further discussion on the risks attendant to the Key Factors Affecting Operating Results, see the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022.
Brazilian Economic Environment
The Brazilian government has frequently intervened in the Brazilian economy and occasionally made drastic changes in policy and regulations. The Brazilian government’s actions to control inflation and affect other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies and incentives, price controls, currency devaluations, capital controls and limits on imports. Changes in Brazil’s monetary, credit, tariff and other policies could adversely affect our business, as could inflation, currency and interest-rate fluctuations, social instability and other political, economic or diplomatic developments in Brazil, as well as the Brazilian government’s response to these developments.
Rapid changes in Brazilian political and economic conditions that have occurred and may occur require continued assessment of the risks associated with our activities and the adjustment of our business and operating strategy accordingly. Developments in Brazilian government policies, including changes in the current policy and incentives adopted for financing exports of Brazilian goods, or in the Brazilian economy, over which we have no control, may have a material adverse effect on our business.
Inflation and exchange rate variations have had and may continue to have substantial effects on our financial condition and results of operations.
Inflation and exchange rate variations affect our monetary assets and liabilities denominated in Brazilian reais. The value of these assets and liabilities as expressed in US Dollars declines when the real devalues against the US Dollar and increases when the real appreciates. In periods of devaluation of the real, we report (i) a remeasurement loss on real-denominated monetary assets and (ii) a remeasurement gain on real-denominated monetary liabilities. For additional information on the effects of exchange rate variations on our financial condition and results of operations, see the section entitled “Item 3. Quantitative and Qualitative Disclosures about Market Risk.”
Development of the UAM Market
Our revenue will be directly tied to the continued development and sale of eVTOL and related services. While we believe the market for UAM will be large, it remains undeveloped and there is no guarantee of future demand. We currently anticipate commercialization of our eVTOL services-and-support business beginning in 2025, followed by the commercialization and initial revenue generation from the sale of our eVTOLs beginning in 2026, and our business will require significant investment leading up to launching passenger services, including, but not limited to, final engineering designs, prototyping and testing, manufacturing, software development, certification, pilot training and commercialization.
We believe one of the primary drivers for adoption of our UAM services is the value proposition and time savings offered by aerial mobility relative to traditional ground-based transportation. Additional factors impacting the pace of adoption of our UAM services include but are not limited to: perceptions about eVTOL quality, safety, performance and cost; perceptions about the limited range over which eVTOL may be flown on a single battery charge; volatility in the cost of oil and gasoline; availability of competing forms of transportation, such as ground or air taxi or ride-hailing services; the development of adequate infrastructure; consumers’ perception about the convenience and cost of transportation using eVTOL relative to ground-based alternatives; and increases in fuel efficiency, autonomy, or electrification of cars. In addition, macroeconomic factors could impact demand for UAM services, particularly if end-user pricing is at a premium to ground-based transportation alternatives or more permanent work-from-home behaviors persist following the COVID pandemic. We anticipate initial operations in selected high-density metropolitan areas where traffic congestion is particularly acute and operating conditions are suitable for early eVTOL operations. If the market for UAM does not develop as expected, this would impact our ability to generate revenue or grow our business.
Competition
We believe that our primary sources of competition are focused UAM developers and established aerospace and automotive companies developing UAM businesses. In addition, we are likely to face competition in our specific business segments from fleet operators that do not partner with us, aviation companies that have built extensive aircraft service and support networks and potentially providers of Unmanned Traffic Management systems if those systems are enhanced to higher levels of safety to support manned flight operations. We expect the UAM industry to be dynamic and increasingly competitive; our competitors could get to market before us, either generally or in specific markets. Even if we are first to market, we may not fully realize the benefits we anticipate and we may not receive any competitive advantage or may be overcome by other competitors. If new companies or existing aerospace or automotive companies launch competing solutions in the markets in which we intend to operate and obtain large-scale capital investment, we may face increased competition. Additionally, our competitors may benefit from our efforts in developing consumer and community acceptance for UAM products and services, making it easier for them to obtain the permits and authorizations required to operate UAM services. In the event we do not capture a first mover advantage, or our current or future competitors overcome our advantages, our business, financial condition, operating results and prospects would be harmed.
Government Certification
We plan to obtain authorizations and certifications for our eVTOL with the ANAC, FAA and EASA initially and will seek certifications from other aviation authorities as necessary. We will also need to obtain authorizations and certifications related to the production of our aircraft and the deployment of our related services. While we anticipate being able to meet the requirements of such authorizations and certifications, we may be unable to obtain such authorizations and certifications, or to do so on the timeline we project. Should we fail to obtain any of the required authorizations or certifications, or do so in a timely manner, or any of these authorizations or certifications are modified, suspended or revoked after we obtain them, we may be unable to launch our commercial service or do so on the timelines we project, which would have adverse effects on our business, prospects, financial condition and/or results of operations.
Initial Business Development Engagement
Since its founding, Eve has been engaged in multiple market and business development projects around the world. Examples of this include two concepts of operation (CONOPS) with Airservices Australia as well as with the United Kingdom Civil Aviation Authority. Both of these market and business development initiatives demonstrated Eve’s ability to create new procedures and frameworks designed to enable the safe scalability of UAM together with our partners. Using these initiatives as a guide, Eve has launched CONOPS in Rio de Janeiro, Miami, Japan and Chicago, and hopes to launch additional concepts of operation in the United States, Brazil and around the world.
In addition to our market development initiatives, Eve has signed non-binding letters of intent to sell over 2,850 of our eVTOL aircraft and we continue to seek additional opportunities for sales partnerships. In addition to these deals, Eve has been actively involved in the UAM ecosystem development by signing Memorandums of Understanding (MOUs) with more than 28 market-leading partners in segments spanning infrastructure, operations, platforms, utilities and others. In the future, we plan to focus on implementation and ecosystem readiness with our existing partners while continuing to seek UATM and support-services partnerships in order to complement our business-model and drive growth.
Fully-Integrated Business Model
Eve’s business model to serve as a fully-integrated eVTOL transportation solution provider is uncertain. Present projections indicate that payback periods on eVTOL aircraft will result in a viable business model over the long-term as production volumes scale and unit economics improve to support sufficient market adoption. As with any new industry and business model, numerous risks and uncertainties exist. Our financial results are dependent on certifying and delivering eVTOL on time and at a cost that supports returns at prices that sufficient numbers of customers are willing to pay based on value arising from time and efficiency savings from utilizing eVTOL services. Our aircraft include numerous parts and manufacturing processes unique to eVTOL aircraft, in general and our product design, in particular. Best efforts have been made to estimate costs in our planning projections; however, the variable cost associated with assembling our aircraft at scale remains uncertain at this stage of development. The success of our business also is dependent, in part, on the utilization rate of our aircraft and reductions in utilization will adversely impact our financial performance. Our aircraft may not be able to fly safely in poor weather conditions, including snowstorms, thunderstorms, lightning, hail, known icing conditions and/or fog. Inability to operate safely in these conditions would reduce our aircraft utilization and cause delays and disruptions in our services. We intend to effectuatemaintain a high daily aircraft utilization rate which is the amount of time our Business Combination usingaircraft spend in the air carrying passengers. High daily aircraft utilization is achieved in part by reducing turnaround times at vertiports so we can fly more hours on average in a day. Aircraft utilization is reduced by delays and cancellations from various factors, many of which are beyond our control, including adverse weather conditions, security requirements, air traffic congestion and unscheduled maintenance events.
Components of Results of Operations
Revenue
Eve is a development stage company and has not generated any revenue and has incurred operating losses since inception. We do not expect to generate relevant revenue from eVTOL sales unless and until we obtain regulatory approval of and commercialize our first eVTOL. Projected revenue in 2025 is comprised of service and support and UATM. These eVTOL-related revenue sources are not solely dependent on Eve aircraft, which are not expected to begin production until 2025 and generate revenue until 2026. Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our eVTOL.
Operating Expenses
Research and Development Expenses
Research and development activities represent a significant part of Eve’s business. Eve’s research and development efforts focus on the design and development of eVTOLs, the development of services and operations for its vehicles and those operated by third parties, as well as the development of a UATM software platform. Research and development expenses consist of personnel-related costs (including salaries, bonuses, benefits and stock-based compensation) for the Eve’s employees focused on research and development activities and costs of consulting, equipment and materials, as well as other related costs, depreciation and amortization and an allocation of Eve’s general overhead, including rent, information technology costs and utilities. Eve expects research and development expenses to increase significantly as it increases staffing to support eVTOL aircraft engineering and software development, builds aircraft prototypes, progresses towards the launch of its first eVTOL aircraft and continues to explore and develop next generation aircraft and technologies.
Eve cannot determine with certainty the timing or duration of, or the completion costs of its eVTOL aircraft due to the inherently unpredictable nature of its research and development activities. Development timelines, the probability of success and development costs can differ materially from expectations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of personnel-related costs, (including salaries, bonuses, benefits and stock-based compensation) for employees associated with administrative services such as executive management, legal, human resources, information technology, accounting and finance. These expenses also include certain third-party consulting services, including business development, contractor and professional services fees, audit and compliance expenses, certain insurance costs, certain facilities costs and any corporate overhead costs not allocated to other expense categories, including allocated depreciation, rent, information technology costs and utilities. Selling, general and administrative expenses have increased in absolute dollars as Eve ramped up operations and became a public company, which is required to comply with the applicable provisions of the Sarbanes-Oxley Act (“SOX”) and other rules and regulations. Eve has been incurring and will continue to incur additional costs for employees and third-party consulting services related to operating as a public company and to support Eve’s commercialization efforts.
New Warrants Expenses
Eve issued or agreed to issue new warrants to potential customers, financiers and suppliers. See more details in Note 11. The new warrants exercisable upon the closing of the transaction were recognized by Eve at their respective fair values on this date as an operating expense (since Eve has no current revenue or binding contracts in place).
Results of Operations (unaudited)
Comparison of Three and Six Months Ended June 30,2023 to the Three and Six Months Ended June 30,2022:
The following tables set forth statement of operations information for the three and six months ended June 30, 2023 and 2022.
| 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 | |||||||||||
| Y-o-Y Changes for the Three Months Ended June 30, 2023 vs June 30, 2022 | Y-o-Y Changes for Six Months Ended June 30, 2023 vs June 30, 2022 | ||||||||||||
| Changes in $ | Changes in % | Changes in $ | Changes in % | ||||||||||
| Operating expenses | |||||||||||||
| Research and development | 11,403,977 | 109 | % | 23,817,628 | 122 | % | |||||||
| Selling, general and administrative | (9,095,827 | ) | (58) | % | (4,259,541 | ) | (25) | % | |||||
| New warrants expenses | (87,352,000 | ) | (100) | % | (87,352,000 | ) | (100) | % | |||||
| Loss from operations | 85,043,850 | (75) | % | 67,793,913 | (55) | % | |||||||
| Change in fair value of derivative liabilities | (12,626,925 | ) | (216) | % | (14,821,425 | ) | (254) | % | |||||
| Financial investment income | 2,157,881 | 262 | % | 5,348,900 | 602 | % | |||||||
| Other financial gain/(loss), net | 1,410,045 | (541) | % | 2,075,204 | 2,104 | % | |||||||
| Loss before income taxes | 75,984,851 | (71) | % | 60,396,592 | (52) | % | |||||||
| Income tax expense | (173,312 | ) | 134 | % | (347,027 | ) | 268 | % | |||||
| Net loss | 75,811,539 | (71) | % | 60,049,565 | (51) | % | |||||||
Research and development expenses
Research and development expenses increased by $11.4 million, from $10.4 million in the three months ended June 30, 2022, to $21.8 million in the three months ended June 30, 2023. Research and development expensesincreasedby $23.8 million, from $19.5 million in the six months ended June 30, 2022to $43.3 million in the six months ended June 30, 2023. This increase in research and development was primarily due to an increase in R&D’s team headcount, whose activities are mainly related to eVTOL and UATM development, as well as higher engineering expenses contemplated in MSA agreements with ERJ and Atech, mainly related to cost of supplies for the development of theprototype vehicle, a full-scale model of Eve’s eVTOL, including batteries, motors, thermal management systems and propellers. Further, additional milestone payments and purchases of parts, equipment and supplies went to suppliers and outside contractors in connection with the continued development of the prototype vehicle. Lastly, Eve also started to incur development expenses related to its UATM system in 2021, which continued throughout 2022 and 2023.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased $9.1 million, from $15.7 million in the three months ended June 30, 2022, to $6.6 million in the three months ended June 30, 2023. Selling, general and administrative expenses decreasedby $4.3 million, from $17.0 millionin the six months ended June 30, 2022to $12.8 million in the six months ended June 30, 2023. The decrease in selling, general and administrative expenses was largely driven by the non-recurring nature of several expenses related to the Company’s listing in the New York Stock Exchange (NYSE) on May 9, 2022, including consulting services and marketing expenses.
Financial investment income
Financial investment income increased from $0.8 million in the threemonths ended June 30, 2022, to $3.0 million in the three months ended June 30, 2023.Financial investment income increased from $0.9 million in the six months ended June 30, 2022, to $6.2 million in the six months ended June 30, 2023. Eve has invested its cash in short fixed-income instruments of low risk, mostly in US Dollar and high-quality financial institutions.
Other financial gain/(loss), net
Other financial loss, net of $0.3 million in the threemonths ended June 30, 2022, was reverted into a gain of $1.1 million in the three months ended June 30, 2023. This gain was driven mainly by accrual of interest in the Related Party Loan. Eve and Embraer entered into the Related Party Loan agreement on August 1, 2022.
Loss before income tax
As a result of the aforementioned factors, loss before taxes on income decreased by $76.0 million, from a loss of $107.1 million in the three months ended June 30, 2022, to a loss of $31.1 million in the three months ended June 30, 2023. As a result of the aforementioned factors, loss before taxes on income decreased by $60.4million, from a loss of $117.1million in the six months ended June 30, 2022 to a loss of $56.7million in the six months ended June 30, 2023.
Net Loss and comprehensive loss
As a consequence of the aforementioned factors, our consolidated net loss after taxes, decreased by $75.8 million, from a loss of $107.2 million in the three months ended June 30, 2022, to a loss of $31.4 million in the three months ended June 30, 2023. As a consequence of the aforementioned factors, our consolidated net loss after taxes, decreased by $60.0 million, froma lossof $117.2 millionin the six months ended June 30, 2022 to a lossof $57.2 millionin the six months ended June 30, 2023.
Liquidity and Capital Resources
Eve has incurred net losses since its inception and to date has not generated any revenue from the proceedsdesign, development, manufacturing, engineering and sale or distribution of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
electric aircraft. We expect to continue to incur losses and negative operating cash flows for the foreseeable future until we successfully commence sustainable commercial operations.
As of the Closing of the business combination with Zanite Acquisition Corp., Eve received net proceeds from the business combination and PIPE Investment of approximately $329.1 million. As of June 30, 2023, Eve had cash of $33.6 million, investments in marketable securities of $150.8 million and a related party loan receivable of $84.6 million from EAH. Additionally, on January 23, 2023, the Company secured two credit lines with BNDES for a total of R$490.0 million (approximately US$101.7 million, using the exchange rate on June 30, 2023), which once drawn, results in total liquidity of $370.7 million. The total liquidity is expected to be sufficient to fund Eve's current operating plan for at least the next twelve months. In addition, Eve will receive the proceeds from any exercise of any warrants in cash, other than a cashless exercise effected in accordance with the terms of such warrants. For additional information, please see “Liquidity and Capital Resources” in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022.
Eve’s future capital requirements will depend on many factors, including:
| • | researchand developmentexpensesas itcontinuesto developitseVTOLaircraft; | |
| • | capitalexpendituresin theexpansionof itsmanufacturingcapacities; | |
| • | additionaloperatingcostsand expensesforproductionramp-upand raw materialprocurementcosts; | |
| • | generaland administrativeexpensesas Eve scalesitsoperations; | |
| • | interestexpensefromany debtfinancingactivities;and | |
| • | sellingand distributionexpensesas Eve builds,brandsand marketselectricaircraft. |
Eve intends to continue to use the proceeds received from the Business Combination and the PIPE Investment primarily to fund its research and development activities and other personnel costs, which are our business’ principal uses of cash. In light of the significant costs innumber of redemptions that occurred during the pursuitbusiness combination, the current trading price for shares of our acquisition plans. We cannot assure youyour common stock and the unlikelihood that our planswe will receive significant proceeds from exercises of the warrants because of the disparity between the exercise price of the warrants and the current trading price of the common stock, these funds will likely not be sufficient to enable Eve to complete all necessary development of and commercially launch its eVTOL aircraft. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from our customers, the expansion of sales and marketing activities and the timing and extent of spending to support development efforts. Until Eve generates sufficient operating cash flow to cover its operating expenses, working capital needs and planned capital expenditures, or if circumstances evolve differently than anticipated, Eve expects to utilize a Business Combination will be successful.
Resultscombination of Operations
We have neither engaged inequity and debt financing to fund any operations (other than searching for a Business Combination after our Initial Public Offering) nor generated any revenuesfuture capital needs. Currently, no decision has been made as to date. Our only activitiesspecific sources of additional funding and Eve may explore different potential funding opportunities including potential long-term debt finance lines with private and public banks, advances and pre-delivery down payments from inception through September 30, 2020 were organizational activities, those necessary to prepare for the Initial Public Offering, described below. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance),customers as well as for due diligence expenses.
Forequity and convertible lines. Eve may be unable to raise additional funds when needed on favorable terms or at all. The sale of securities by selling securityholders pursuant to the period from August 7, 2020 (inception) through September 30, 2020, we hadProspectus could result in a net loss of $1,000, which consisted of formation costs.
Liquidity and Capital Resources
As of September 30, 2020, we had no cash. Untilsignificant decline in the consummationpublic trading price of the Initial Public Offering, our only sourcecommon stock and could further decrease the likelihood of liquidity was an initial purchaseraising additional funds successfully. If Eve raises funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of common stockstock. If Eve raises funds by the Sponsorissuing debt securities, these debt securities would have rights, preferences and loans fromprivileges senior to those of preferred and common stockholders. The terms of debt securities or borrowings could impose significant restrictions on our Sponsor.
Subsequent to the quarterly period covered by this Quarterly Report, on November 19, 2020, we consummated the Initial Public Offering of 23,000,00 Units, which included the full exercise by the underwriters of their over-allotment optionoperations. The capital markets have in the amount of 3,000,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $230,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 9,650,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to our stockholders, generating gross proceeds of $9,650,000.
Following the Initial Public Offering, the full exercise of the over-allotment option,past and the sale of the Private Placement Warrants, a total of $232,300,000 was placedmay in the Trust Account. We incurred $13,143,093 in transaction costs, including $4,600,000future, experience periods of underwriting fees, $8,050,000upheaval that could impact the availability and cost of deferred underwriting feesequity and $493,093 of other offering costs.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. We may withdraw interest to pay taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts,Eve requires additional financing but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.
We do not believe we will needis unable to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amountcapital or generate cash flows necessary to do so, wecontinue its research and development and invest in continued innovation, Eve may have insufficientnot be able to compete successfully, which would harm its business, results of operations and financial condition. If adequate funds are not available, to operate our business prior to our Business Combination. Moreover, weEve may need to obtain additional financing either to completereconsider its expansion plans or limit its research and development activities, which could have a material adverse impact on our Business Combination or because we become obligated to redeem a significant numberbusiness prospects and results of our public shares upon consummationoperations.
Cash Flows
The following table summarizes cash flows for the periods indicated:
| Six Months Ended June 30, | |||||||
| 2023 | 2022 | ||||||
| Net cash used by operating activities | $ | (47,603,836 | ) | $ | (21,854,275 | ) | |
| Net cash provided (used) by investing activities | 31,834,620 | (154,000,000 | ) | ||||
| 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 | |||||
| Net (decrease) increase in cash and cash equivalents | $ | (15,554,292 | ) | $ | 161,940,031 | ||
Net Cash Used by Operating Activities
2023 Compared with 2022
Net cash used by operating activities for the six months ended June 30, 2023,was $47.6 million versus net cash used of our Business Combination, $21.9 million in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneouslythe six months ended June 30, 2022, with the completionchange resulting principally from an increase in research and development expenses in 2023, as compared to 2022, partially compensated by higher accounts payable to ERJ.
Net Cash Provided (Used) by Investing Activities
2023 Compared with 2022
Net cash provided by investing activities for the six months ended June 30, 2023,was $31.8 million versus net cash used of $154.0 millionin the six months ended June 30, 2022.The change results principally from the investment of proceeds from the business combination with Zanite Acquisition Corp. and from PIPE investments in interest-bearing marketable securities and a related party loan receivable of $83.6 million to Embraer Aircraft Holdings (EAH).
Net Cash Provided (Used) by Financing Activities
2023 Compared with 2022
Net cash used by financing activities for the six months ended June 30, 2023, was $0.3 million versus net cash provided of $337.7 million in the six months ended June 30, 2022. The change results principally from the proceeds raised from the business combination with Zanite Acquisition Corp. and from PIPE investors in Eve’s public-listing process in May 2022.
As of June 30, 2023, we had no outstanding debt on our Business Combination. If we are unablebalance sheet.
Recent Developments
On July 31, 2023, Eve announced that its Board of Directors had appointed Johann Bordais, current President and CEO of Embraer Services & Support, as Chief Executive Officer, effective September 1, 2023. Eve’s co-Chief Executive Officers, Andre Stein and Jerry DeMuro, will remain at Eve with new roles.
Mr. Bordais has led Embraer’s Services & Support business since its foundation in 2016. He was pivotal in transforming the area into Embraer’s fast-growing, most profitable business, with revenues of $1.27 billion in 2022, accounting for 28% of Embraer’s total revenue. During his tenure at Embraer Services & Support, Mr. Bordais transformed Embraer’s aftersales business model, globalizing its solutions and enhancing customer satisfaction through innovation and integrated products, including providing a broad portfolio of solutions to complete our Business Combination because we do not have sufficient funds availablecustomers in Commercial Aviation, Executive Jets and Defense, with over 2,300 people dedicated to us, wesupporting customers and their 5,700 aircraft worldwide.
Mr. DeMuro will remain at Eve as Executive Vice President of Corporate Development through the end of October 2023 to assist Mr. Bordais in the transition. Mr. DeMuro joined the company in September 2021 as co-CEO and was instrumental in Eve’s SPAC transaction, taking the company to a very successful NYSE listing that raised approximately $400 million from multiple strategic financial investors.
Andre Stein will assume the role of Chief Strategy Officer at Eve, based in the United States. He will be forcedresponsible for defining Eve’s strategy, including commercialization, growth and the development and execution of launch strategies with Eve’s international partners and operators. Mr. Stein has over 25 years of experience in the aerospace industry with a focus on sales, product development and market strategy and has nurtured the Urban Air Mobility initiative since its inception, helping to cease operationsdefine the industry’s potential use-cases, markets and liquidate the Trust Account. In addition, following our Business Combination, if cashproduct characteristics, while contributing to Eve’s spin-off process, NYSE listing and capital raise.
Off-Balance Sheet Arrangements
For additional information on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangementsitems as of SeptemberJune 30, 2020.2023, please refer to Note 17.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement the Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services. We began incurring these fees on November 19, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Pursuant to a registration rights agreement entered into on November 16, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring us to register such securities for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of AmericaU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosuredisclosures of contingent liabilities and the reported amounts of expenses during the reporting period. Eve’s estimates are based on our historical experience and on various other factors that Eve believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.
The accounting policies and estimates that affect the condensed consolidated financial statements and the judgments and assumptions used are consistent with those described in the MD&A in our 2022 Form 10-K/A.
Credit Risk
Financial instruments, which subjects Eve to concentrations of credit risk, consist primarily of cash, cash equivalents, financial investments, related party loan receivable and derivative financial instruments. Eve’s cash and cash equivalents and financial investments are held at major financial institutions located in the United States of America and Brazil. At times, cash account balances with any one financial institution may exceed Federal Deposit Insurance Corporation insurance limits ($250,000 per depositor per institution). Management believes the financial institutions that hold Eve’s cash and cash equivalents and financial investments are financially sound and, accordingly, minimal credit risk exists with respect to cash and cash equivalents and financial investments.
Eve also performs ongoing evaluation of the counterparty of our Intercompany Loan.
Emerging Growth Company Status
We are 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”). Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we are not subject to the same implementation timeline for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.
We also take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.
We will lose our emerging growth company status and become subject to the SEC’s internal control over financial reporting management and auditor attestation requirements upon the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the financial statements,completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which requires the market value of our Common Stock that are held by non-affiliates to exceed $700 million as of the prior June 30th, and income and expenses(2) the date on which we have issued more than $1.0 billion in non-convertible debt during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to market risk for changes in the Brazilian interest rate CDI, applicable to our cash equivalent in Brazil, that was invested in Bank Deposit Certificates (“CDB”), (Applications issued by financial institutions in Brazil, immediately available for redemption). As of SeptemberJune 30, 2020, we were not subject to any market or interest rate risk. Following the consummation2023, approximately 2.81% of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury obligations with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Dueconsolidated cash, cash equivalents and financial investments were indexed to the short-term naturevariation of thesethe CDI rate.
The CDI rate is an average of interbank overnight rates in Brazil. The risk arises from the possibility of the Company incurring decrease on financial income of financial investment due fluctuations in Brazilian interest rate.
The interest rates of the lines of credit made available by BNDES are fixed which will not result in unexpected variability of the interest expenses.
Our investment policy is focused on the preservation of capital and supporting its liquidity needs. The Company’s policy for managing the risk of fluctuations in interest rates on financial investments we believe there will be no associated material exposureis to interest rate risk.maintain a system to measure market risk, which consists of an aggregate analysis of variety of risk factors that might affect the return of those investments.
Foreign Currency Risk
The Company’s operations most exposed to foreign exchange gains/losses are those denominated in Reais (labor costs, tax issues, local expenses and financial investments) arising from the subsidiary located in Brazil. The relationship of the real to the value of the US Dollar, may adversely affect us, mainly due to the factor that 2% of total assets and 13% of total liabilities are in reais.
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the US Dollar and other foreign currencies. On June 30, 2023, the real appreciated against the US Dollar in comparison to June 30, 2022, reaching BRL4.8192 per US$1.00 as of June 30, 2023.
Management’s Evaluation of Disclosure ControlsControl and Procedures
Disclosure
The Company’s management is responsible for maintaining disclosure controls and procedures that are designed to ensure that material information required to be disclosed by us in our reports that we file or submit under the Exchange Act, reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officerofficers and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required financial disclosure. Because of the inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met.
Under the supervision and with the participation of our management, including our principal executive officerofficers and principal financial and accounting officer, we conducted an evaluation ofevaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal quarter ended September 30, 2020, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officerofficers and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective atas of June 30, 2023, due to material weaknesses in our internal control over financial reporting, as previously disclosed in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K/A for the year ended December 31, 2022, which have not been remediated as of June 30, 2023.
Notwithstanding the identified material weaknesses in internal control over financial reporting, our management performed additional analysis as deemed necessary to ensure that our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated, in all material respects, in accordance with generally accepted principles in the United States of America.
Previously Reported Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable assurance levelpossibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As previously disclosed in 9A “Controls and accordingly, provided reasonable assuranceProcedures” of our Annual Report on Form 10-K/A for the year ended December 31, 2022, we have identified material weaknesses in our internal control over financial reporting. In particular:
• | We did not design and maintain effective controls to timely analyze, account for and disclose non-routine, unusual or complex transactions, as well as accrued expenses, share-based payments and properly disclose certain financial presentation matters. | |
• | We did not design and implement an effective risk assessment, information and communication processes. | |
• | We do not have sufficient personnel with qualifications and experience within our control environment to address complex accounting matters. |
Management’s Remediation Plan
Our management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the information requiredmaterial weaknesses. In order to be disclosed by usaddress the material weaknesses in reports filed underinternal control over financial reporting described above, management, with direction from the Exchange ActAudit Committee, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rulesprocess of developing and forms.implementing remediation plans to address the control deficiencies that led to these material weaknesses, including the following actions that were taken in 2023:
• | We engaged outside consultants to assist in the design, implementation, documentation and remediation of internal controls that address the relevant risks and to assist us in the evaluation of our relevant accounting and operating systems, to enable us to improve our processes and controls over financial reporting. | |
• | We engaged an outside firm to assist management with the accounting and disclosure of complex accounting transactions that occur during the year. | |
• | We have identified the root cause of the deficiencies and the related relevant controls to be designed and implemented to timely detect and prevent material errors or omitted disclosures. | |
| • | We have designed and implemented controls to perform an entity level risk assessment and address identified risks related to information and communication processes. | |
• | We onboarded multiple resources with qualifications, education, certifications and experience to address complex accounting matters. |
Our remediation activities are continuing during 2023. In addition to the above actions, we expect to both continue with the actions above and engage in additional activities, including, but not limited to:
• | Management will continue to evaluate and hire additional resources within our accounting and financial reporting and internal control functions with the appropriate experience, certifications, education and training for key financial reporting and accounting positions. | |
• | We plan to provide training to our personnel performing internal control functions in order to enhance their level of understanding over the appropriate design, implementation and effectiveness of controls. | |
• | We will continue our iterative risk assessment process, to enhance overall compliance. | |
• | Management will continue to implement and evaluate controls to ensure timely communication within the relevant areas of the Company to identify events and/or transactions that may impact the Company’s financial reporting. |
Management believes these enhancements, once implemented, will reduce the risk of a material misstatement resulting from the material weaknesses described above. However, it will require a period of time to determine the operating effectiveness of any newly implemented internal controls.
Changes in Internal Control over Financial Reporting
There
Except as discussed above, there was no change in our internal control over financial reporting that occurred during the fiscalsecond quarter of 2020 covered by this Quarterly Report on Form 10-Qended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
Except as set forth below, asWe are, from time to time, subject to various claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. We are not currently a party to any such claims, lawsuits or proceedings, the dateoutcome of this Quarterly Report, there have been nowhich, if determined adversely to us, we believe would, individually or in the aggregate, be material changes with respect to those risk factors previously disclosed in our Registration Statement filed with the SEC. Any of these factors couldbusiness or result in a significant or material adverse effect on our future operating results, financial condition or cash flows.
Please refer to the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2022. Any of operationsthose factors, or financial condition. Additionaladditional risk factors not presently known to us or that we currently deem immaterial, may also impaircould result in a material adverse effect on our business, financial condition or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The securities in which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.
The proceeds held in the Trust Account are invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our Amended and Restated Certificate of Incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the Trust Account, plus any interest income not released to us, net of taxes payable. Negative interest rates could impact the per-share redemption amount that may be received by public stockholders.
On November 19, 2020, we consummated the Initial Public Offering of 23,000,000 Units, inclusive of 3,000,000 Units sold to the underwriters upon the underwriters’ election to fully exercise their over-allotment option, at a price of $10.00 per Unit, generating total gross proceeds of $230,000,000. BTIG, LLC acted as sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-349618). The Securities and Exchange Commission declared the registration statement effective on November 16, 2020.None.
Simultaneous with the consummation of the Initial Public Offering and the full exercise of the over-allotment option, we consummated the private placement of an aggregate of 9,650,000 warrants at a price of $1.00 per Private Placement Warrant, generating total proceed of $9,650,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering including the over-allotment option, and the Private Placement Warrants, $232,300,000 was placed in the Trust Account.
We paid a total of $4,600,000 in underwriting discounts and commissions and $493,093 for other offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $8,050,000 in underwriting discounts and commissions.
None.
Not Applicable.applicable.
None.
The following exhibits are filed or furnished as a part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Portions of this exhibit have been omitted pursuant to Item 601(b)(2)(ii) or 601(b)(10)(iv) of Regulation S-K, as applicable. ** Furnished. |
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In accordance withPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereuntohereunto duly authorized.
| EVE HOLDING, INC. | |||||||||||
Date:August 8, 2023 | By: | /s/ Gerard J. DeMuro | |||||||||
Name: | Gerard J. DeMuro | ||||||||||
Title: | Co-Chief Executive Officer | ||||||||||
| (Principal Executive Officer) | |||||||||||
Date: August 8, 2023 | By: | /s/ | ||||||
Name: | André Duarte Stein | |||||||
Title: | Co-Chief Executive Officer | |||||||
| (Principal Executive Officer) | ||||||||
Date: | August 8, 2023 | By: | /s/ | ||||||||
Name: | Eduardo Siffert Couto | ||||||||||
Title: | Chief Financial Officer | ||||||||||
| (Principal Financial and Accounting Officer) | |||||||||||
| 16 |
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