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Prospectus Supplement No. 6
(to Prospectus dated April 26, 2023)
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-265337
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EVE HOLDING, INC.
319,264,425 SHARES OF COMMON STOCK
14,250,000 WARRANTS TO PURCHASE SHARES OF COMMON STOCK
66,845,072 SHARES OF COMMON STOCK UNDERLYING WARRANTS
This Prospectus Supplement, dated August 8, 2023 (the “Supplement”), supplements the prospectus, dated April 26, 2023, filed by Eve Holding Inc., a Delaware corporation (the “Company”), with the Securities and Exchange Commission (“SEC”) on April 26, 2023 pursuant to Rule 424(b) under the Securities Act of 1933, as amended, relating to the Registration Statement on Form S-1, as amended (File No. 333-265337) (the “Prospectus”), relating to the issuance by the Company of up to 66,845,072 shares of common stock, comprising (i) the shares of common stock that may be issued upon exercise of 11,500,000 outstanding public warrants (as defined in the Prospectus), (ii) the shares of common stock that may be issued upon exercise of 14,250,000 outstanding private placement warrants (as defined in the Prospectus), and (iii) up to 41,095,072 shares of common stock that may be or have been issued upon exercise of the new warrants (as defined in the Prospectus). The Prospectus also relates to the resale by certain of the Selling Securityholders (as defined in the Prospectus) of up to 319,264,425 shares of common stock, comprising (i) 220,000,000 shares of common stock issued in connection with the business combination with the urban air mobility business of Embraer S.A., a Brazilian corporation (sociedade anônima) (“Embraer”), originally issued at a price of $10.00 per share in exchange for Embraer’s interests in EVE UAM, LLC, (ii) 35,730,000 shares of common stock issued to certain qualified institutional buyers and accredited investors in private placements consummated in connection with the business combination, originally issued at a price of $10.00 per share, (iii) 5,750,000 shares of common stock that were converted in connection with the business combination on a one-to-one basis from Zanite Acquisition Corp. Class B common stock originally issued at a price of $0.004 per share, (iv) 260,000 shares of common stock underlying restricted stock units granted to certain directors and an officer of the Company, (v) 140,000 restricted shares of common stock granted to an officer of the Company, (vi) up to 14,250,000 shares of common stock that may be issued upon exercise of private placement warrants held by certain parties to the Amended and Restated Registration Rights Agreement (as defined in the Prospectus), originally issued at a price of $1.00 per warrant, (vii) up to 41,095,072 shares of common stock that may be or have been issued upon exercise of new warrants that have been issued or are issuable, subject to triggering events, to United Airlines Ventures, Ltd., a Cayman Islands company (“United”), and certain Strategic PIPE Investors (as defined in the Prospectus) originally issued in connection with entering into certain commercial arrangements without the payment of any purchase price and (viii) 2,039,353 shares of common stock issued to United in a private placement consummated on September 6, 2022 for a purchase price per share of $7.36 and an aggregate purchase price of $15,000,000. The Prospectus also relates to the resale by certain of the Selling Securityholders of 14,250,000 private placement warrants held by certain parties to the Amended and Restated Registration Rights Agreement, originally issued at a price of $1.00 per warrant.
This Supplement is being filed to update and supplement the information contained in the Prospectus with the information from our Form 10-Q, filed with the SEC on August 8, 2023 (the “Form 10-Q”). Accordingly, we have attached the Form 10-Q to this Supplement.
This Supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This Supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this Supplement, you should rely on the information in this Supplement.
Our common stock and public warrants trade on the New York Stock Exchange under the symbols “EVEX” and “EVEXW,” respectively. On August 7, 2023, the last quoted sale price for our common stock as reported on NYSE was $8.50 per share and the last quoted sale price for our public warrants was $0.7952 per warrant.
We are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for this prospectus and for future filings.
Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing in our securities in “Risk Factors” beginning on page 12 of the Prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this Supplement is truthful or complete. Any representation to the contrary is a criminal offense.
This Supplement is dated August 8, 2023
The following discussion and analysis provide information that Eve's management believes is relevant to an assessment and understanding of Eve'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 statements for the three and six months ended June 30, 2023 and 2022, and the related notes that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. 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 Statements” 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 on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including, without limitation, statements under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future 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. These risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
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our ability to raise financing in the future;
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the impact of the regulatory environment and complexities with compliance related to such environment, including changes in applicable laws or regulations;
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the impact of public health crises and epidemics;
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our ability to implement and maintain an effective system of internal control over financial reporting;
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our ability to grow market share in our existing markets or any new markets we may enter;
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our ability to respond to general economic conditions;
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the impact of foreign currency, interest rate, exchange rate and commodity price fluctuations;
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our ability to manage our growth effectively;
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our ability to achieve and maintain profitability in the future;
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our ability to access sources of capital to finance operations and growth;
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the success of our strategic relationships with third parties;
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competition from other manufacturers and operators of electrical vertical take-off and landing vehicles and other methods of air or ground transportation;
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various environmental requirements;
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retention or recruitment of executive and senior management and other key employees;
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reliance on services to be provided by Embraer and other third parties; and
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•
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other risks and uncertainties described in this Quarterly Report on Form 10-Q, including those under “Risk Factors”
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The list above is not intended to be an exhaustive list of all of our forward-looking statements. Our forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. While we believe these expectations, forecasts, assumptions and judgments are reasonable, our forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Overview
Eve Holding, Inc. (together with its subsidiaries, as applicable, “Eve”, the “Company”, “we”, “us” or “our”), a Delaware corporation, is an aerospace company with operations in Melbourne, Florida and São José dos Campos, São Paulo. The Company is a former blank check company incorporated on November 19, 2020, under the name Zanite Acquisition Corp. (“Zanite”) as a Delaware corporation that was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
Eve’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 maintain a high daily aircraft utilization rate which is the amount of time our aircraft 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.
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Three Months Ended June 30,
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Six Months Ended June 30,
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2023
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2022
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2023 |
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2022 |
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| 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 |
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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
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) |
|
|
(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 expenses increased by $23.8 million, from $19.5 million in the six months ended June 30, 2022 to $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 the prototype 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 decreased by $4.3 million, from $17.0 million in the six months ended June 30, 2022 to $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 three months 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 three months 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 $60.4 million, from a loss of $117.1 million in the six months ended June 30, 2022 to a loss of $56.7 million 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, from a loss of $117.2 million in the six months ended June 30, 2022 to a loss of $57.2 million in 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 design, development, manufacturing, engineering and sale or distribution of 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:
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research and development expenses as it continues to develop its eVTOL aircraft; |
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capital expenditures in the expansion of its manufacturing capacities; |
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additional operating costs and expenses for production ramp-up and raw material procurement costs; |
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general and administrative expenses as Eve scales its operations; |
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interest expense from any debt financing activities; and |
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selling and distribution expenses as Eve builds, brands and markets electric aircraft. |
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 number of redemptions that occurred during the business combination, the current trading price for shares of your common stock and the unlikelihood that we 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 combination of equity and debt financing to fund any future capital needs. Currently, no decision has been made as to specific 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 customers as well as equity 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 Prospectus could result in a significant decline in the public trading price of the common stock and could further decrease the likelihood of raising 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 stock. If Eve raises funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of preferred and common stockholders. The terms of debt securities or borrowings could impose significant restrictions on our operations. The capital markets have in the past and may in the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing.
In the event that Eve requires additional financing but is unable to raise additional capital or generate cash flows necessary to continue its research and development and invest in continued innovation, Eve may not be able to compete successfully, which would harm its business, results of operations and financial condition. If adequate funds are not available, Eve may need to reconsider its expansion plans or limit its research and development activities, which could have a material adverse impact on our business prospects and results of operations.
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 $21.9 million in the six months ended June 30, 2022, with the change 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 million in 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 balance 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 customers in Commercial Aviation, Executive Jets and Defense, with over 2,300 people dedicated to supporting 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 responsible 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 define the industry’s potential use-cases, markets and product characteristics, while contributing to Eve’s spin-off process, NYSE listing and capital raise.
Off-Balance Sheet Arrangements
For additional information on off-balance sheet items as of June 30, 2023, please refer to Note 17.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures 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 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 (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period.
Management’s Evaluation of Disclosure Control and Procedures
The Company’s management is responsible for maintaining disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our reports that we file or submit under the Exchange Act, 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 officers and principal financial officer, 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 officers and principal financial officer, we evaluated 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 period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officers and principal financial officer have concluded that our disclosure controls and procedures were not effective as 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 possibility 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 Procedures” 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:
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•
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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.
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•
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We did not design and implement an effective risk assessment, information and communication processes.
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•
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We do not have sufficient personnel with qualifications and experience within our control environment to address complex accounting matters.
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Management’s Remediation Plan
Our management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the material weaknesses. In order to address the material weaknesses in internal control over financial reporting described above, management, with direction from the Audit Committee, is in the process of developing and implementing remediation plans to address the control deficiencies that led to these material weaknesses, including the following actions that were taken in 2023:
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•
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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.
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•
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We engaged an outside firm to assist management with the accounting and disclosure of complex accounting transactions that occur during the year.
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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.
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• |
We have designed and implemented controls to perform an entity level risk assessment and address identified risks related to information and communication processes. |
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•
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We onboarded multiple resources with qualifications, education, certifications and experience to address complex accounting matters.
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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:
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•
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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.
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•
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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.
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•
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We will continue our iterative risk assessment process, to enhance overall compliance.
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•
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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.
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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
Except as discussed above, there was no change in our internal control over financial reporting that occurred during the second quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.