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Prospectus Supplement No. 13
(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 May 7, 2024 (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 May 7, 2024 (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 May
6, 2024, the last quoted sale price for our common stock as reported on NYSE was
$5.51 per share and
the last quoted sale price for our public warrants was $0.5216 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 May 7, 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2024
or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File No. 001-39704
EVE HOLDING, INC.
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(Exact name of registrant as specified in its charter) |
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Delaware
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85-2549808
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1400 General Aviation Drive
Melbourne, FL 32935
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(Address of Principal Executive Offices, including zip code)
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(321) 751-5050
(Registrant’s telephone number, including area code)
N/A
(Former name and address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.001 per share
Warrants, each whole warrant exercisable for one share of Common Stock
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EVEX
EVEXW
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The New York Stock Exchange
The New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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.
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Large accelerated filer
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☐
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Accelerated filer
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☒
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☒
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of May 7, 2024, there were 269,365,708 shares of common stock, par value $0.001 per share, issued and outstanding.
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 Company’s 2023 Form-10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and the unaudited condensed consolidated financial statements for the three months ended March 31, 2024 and 2023, 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 risk factors set forth under “Cautionary Note Regarding Forward-Looking Statements” and "Risk Factors" in this Quarterly Report on Form 10-Q and in our other filings with the SEC. Capitalized terms not defined have the same meaning as in the notes to the unaudited condensed consolidated financial statements.
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:
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our ability to raise financing in the future;
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•
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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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•
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the impact of public health crises and epidemics;
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•
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our ability to implement and maintain an effective system of internal control over financial reporting;
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•
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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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•
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our ability to respond to general economic conditions;
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•
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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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our ability to successfully develop, certify and commercialize our planned Urban Air Mobility solutions; |
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competition from other manufacturers and operators of electric vertical take-off and landing vehicles and other methods of air or ground transportation;
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•
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various environmental requirements;
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•
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retention or recruitment of executive and senior management and other key employees;
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•
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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 and in our most recent Annual Report on Form 10-K (the “2023 Form 10-K”), 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, Brazil. The Company is a former blank check company incorporated on November 19, 2020, under the name Zanite Acquisition Corp. (“Zanite”) as a Delaware corporation 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 electric vertical take-off and landing vehicles (“eVTOLs”), a portfolio of maintenance and support services focused on Eve’s and third-party eVTOLs, and new air traffic management software
for eVTOLs, (“Vector”), 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 Embraer to de-risk and accelerate its development plans, while saving costs by utilizing Embraer’s extensive resources.
Eve’s Business Model
Eve plans to fuel the development of the UAM ecosystem by providing a complete portfolio of solutions across three 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 Operations Solutions. 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 Vector,
a next-generation UATM software 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
Vector
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.
Service Agreements
Eve has entered into Master Service Agreements (“MSA”) with ERJ and Atech and Shared Service Agreements (“SSA”) with ERJ and EAH. Pursuant to the MSAs, either directly or through their respective affiliates, ERJ and Atech 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 (Aircraft on Ground) support, MRO (Maintenance, Repair and Overhaul) 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 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 has also entered into the Data Access Agreement with ERJ, pursuant to which, among other things, ERJ has agreed to provide Eve 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 agreements.
The aforementioned Services Agreements continue to be in full force and effect. Further information about such agreements is set forth in 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 Operations
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 the latter half of 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. 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 conglomerates developing UAM businesses. 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 conglomerates 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 our project experiences substantial delays, 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 Brazil's Agência Nacional de Aviação Civil (“ANAC”), U.S. Federal Aviation Administration (“FAA”), and European Union Aviation Safety Agency (“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 market and business development initiatives demonstrate 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, Chicago
and
South Korea, 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 2,900 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 30 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.
Results of Operations (unaudited)
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Three Months Ended
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March 31,
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2024
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2023
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(Unfavorable)/
Favorable
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%
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| Operating expenses |
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| Research and development expenses |
$ |
27,455 |
|
|
$ |
21,528 |
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|
$ |
(5,927 |
) |
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(28 |
)% |
| Selling, general and administrative expenses |
|
6,477 |
|
|
|
6,154 |
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(322 |
) |
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(5 |
)% |
Loss from operations
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|
(33,932 |
) |
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(27,683 |
) |
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|
(6,249 |
) |
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(23 |
)% |
| Gain/(loss) from the change in fair value of derivative liabilities |
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6,341
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(2,195
|
) |
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8,536 |
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n.m. |
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| Financial investment income |
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2,337
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3,254
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(918 |
) |
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(28 |
)% |
| Related party loan interest income |
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1,222 |
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|
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990 |
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232 |
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23 |
%
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| Interest expense |
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(412
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) |
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- |
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(412 |
) |
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n.m. |
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| Other (loss)/gain, net |
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(229 |
) |
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34 |
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(263 |
) |
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n.m. |
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| Loss before income taxes |
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(24,673 |
) |
|
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(25,598 |
) |
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|
926 |
|
|
|
4 |
% |
| Income tax expense |
|
623 |
|
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|
174
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(450 |
) |
|
|
(259 |
)% |
| Net loss |
$ |
(25,296 |
) |
|
$ |
(25,772 |
) |
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$ |
476 |
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2 |
%
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n.m. = not meaningful
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 service and operations support for its vehicles and those manufactured by third parties, and the development of Vector, the UATM software platform. Research and development expenses consist of personnel-related costs (including salaries, bonuses, benefits and stock-based compensation) for Eve’s employees focused on research and development activities, fees incurred under the MSAs, equipment and materials, and an allocation of 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.
Research and development expenses increased $5.9 million for the three months ended March 31, 2024. This increase in research and development was primarily due to an increase in R&D’s team headcount, higher engineering expenses contemplated in MSA agreements with ERJ and Atech, and higher expenses 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, propellers and other components. 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.
Selling, general and administrative expenses
Selling, general and administrative
expenses consist primarily of personnel-related costs (including salaries,
bonuses, benefits and share-based compensation) for employees associated with
administrative services such as executive management, business development, legal, human resources,
information technology, accounting and finance. These expenses also include
certain third-party consulting services, contractor and
professional services fees, audit and compliance expenses, insurance costs, corporate overhead costs, depreciation, rent, and utilities.
Selling, general and administrative expenses increased $0.3 million for the three months ended March 31, 2024, primarily related to an increase in headcount and payroll costs of $0.5 million, pre-operational expenses related to the Taubaté facility of $0.4 million, partially offset by decreased director & officer insurance expense of $0.6 million.
Gain/(loss) from the change in fair value of derivative liabilities
Gain from the change in fair value of derivative liabilities increased $8.5 million for the three months ended March 31, 2024, due to the decrease in value of the Company’s Private Placement Warrants. The Private Placement Warrant value is based on the Company’s Public Warrants trading price, which decreased in value by $0.45 for the three months ended March 31, 2024 whereas the Public Warrants increased in value by $0.15 for the three months ended March 31, 2023.
Financial investment income
Financial investment income decreased $0.9 million in the three months ended March 31, 2024, primarily related to the average investment balance decreasing by $76.0 million as compared to the three months ended March 31, 2023.
Liquidity and Capital Resources
Eve has incurred net losses since its inception and to date has not generated any revenue. 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 proceeds from the business combination and PIPE Investment of approximately $357.3 million. In addition, in September 2022, Eve received $15.0 million from United Airlines Ventures, Ltd. (“United”), in connection with a subscription agreement pursuant to which United agreed to subscribe for an aggregate of 2,039,353 shares of common stock and a warrant agreement pursuant to which the Company issued to United new warrants to acquire up to 2,722,536 shares of common stock, each with an exercise price of $0.01 per share. On January 23, 2023, the Company secured loans from BNDES for a total borrowing availability of R$490.0 million (approximately $98.1 million, using the exchange rate on March 31, 2024).
As of March 31, 2024, Eve had cash of $23.6 million, financial investments of $114.7 million, a related party loan receivable of $84.3 million from EAH and $57.5 million available to be drawn on the BNDES loans, providing the Company with approximately $280.0 million of total liquidity. 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.
Eve’s future capital requirements will depend on many factors, including:
| • |
|
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; |
| • |
|
general and administrative expenses as Eve scales its operations; |
| • |
|
interest expense from any debt financing activities; and |
| • |
|
selling and distribution expenses as Eve builds, brands and markets electric aircraft. |
Eve intends to continue to use their liquidity 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 our 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.
Financing Activities
BNDES Loan Agreement
As previously disclosed, on January 23, 2023, Eve Brazil entered into a loan agreement (the “Loan Agreement”) with BNDES, pursuant to which BNDES granted two lines of credit to the Company, with an aggregate amount of R$490 million (approximately $98.1 million, using the exchange rate on March 31, 2024), to support the development of the eVTOL project. For additional information about the Loan Agreement, see the Company’s Current Report on Form 8-K filed with the SEC on January 30, 2023.
On December 21, 2023, the Company announced that Bradesco Bank had concluded that the first line of credit under the Loan Agreement aligned with the 2023 Green Loans Principles, which is a set of guidelines issued for structuring loan operations for sustainable purposes. As of March 31, 2024, a total of R$203.0 million (approximately $40.6 million) had been issued to the Company pursuant to the Loan Agreement.
Cash Flows
The following table summarizes cash flows for the periods indicated (in thousands):
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
2024
|
|
|
2023
|
|
|
|
Change |
|
| Net cash used by operating activities |
$ |
(35,813 |
) |
|
$ |
(19,891 |
) |
|
$ |
(15,922 |
) |
| Net cash used by investing activities |
$ |
(2,106 |
) |
|
$ |
(17,544
|
) |
|
$ |
15,437 |
|
| Net cash provided by financing activities |
$ |
14,747 |
|
|
$ |
- |
|
|
$ |
14,747 |
|
Net Cash Used by Operating Activities
Net cash used by operating activities increased $15.9 million for three months ended March 31, 2024, primarily related to an increase in cash used for working capital of $8.6 million, increased research and development expenses of $5.9 million, increased interest and taxes paid of $0.5 million, lower non-cash operating expenses of $0.4 million, and increased SG&A expenses of $0.3 million.
Net Cash Used by Investing Activities
Net cash used by investing activities decreased $15.4 million for the three months ended March 31, 2024, primarily related to less net purchases of financial investments of $2.0 million in order to fund operations compared to $17.5 million financial investment purchases for the three months ended March 31, 2023.
Net Cash Provided by Financing Activities
Net cash provided by financing activities increased $14.7 million for the three months ended March 31, 2024, primarily related to the proceeds from BNDES loan borrowings.
Critical Accounting Estimates
The preparation of the 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 critical accounting estimates that affect the condensed consolidated financial statements and the judgments and assumptions used are described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2023 Form 10-K.
Credit Risk
Financial instruments, which subjects Eve to concentrations of credit risk, consist primarily of cash, cash equivalents, financial investments, and a related party loan receivable. 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.
The Company also performs an ongoing evaluation of our counterparty, Embraer Aircraft Holdings, Inc., for the related party loan receivable. No allowance for credit loss has been deemed necessary.
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 auditor attestation requirements upon the earlier of the last day of the fiscal year following the fifth anniversary of the date of the completion of Zanite’s IPO on November 19, 2020, or (1) we have total annual gross revenue of at least $1.2 billion, (2) we are deemed to be a large accelerated filer, or (3) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.