Eve (EVEX) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The unaudited statements show a net loss increase to $25.8 million, driven by higher operating expenses and resulting in decreased total assets Unaudited Condensed Consolidated Balance Sheets Total assets decreased to $296.3 million while total liabilities increased, leading to a reduction in stockholders' equity Condensed Consolidated Balance Sheet Data (as of March 31, 2023 vs. December 31, 2022) | Balance Sheet Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $295,536,648 | $312,207,206 | | Cash and cash equivalents | $11,837,193 | $49,146,063 | | Financial investments | $199,119,647 | $178,781,549 | | Total Assets | $296,338,106 | $312,875,428 | | Total Current Liabilities | $32,863,549 | $24,933,011 | | Related party payables | $16,222,416 | $12,625,243 | | Total Liabilities | $33,839,852 | $25,953,085 | | Total Stockholders' Equity | $262,498,254 | $286,922,343 | Unaudited Condensed Consolidated Statements of Operations Net loss widened to $25.8 million from $10.0 million year-over-year due to significantly higher R&D and SG&A expenses Condensed Consolidated Statements of Operations (For the Three Months Ended March 31) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Research and development | $(21,528,338) | $(9,114,687) | | Selling, general and administrative | $(6,154,319) | $(1,318,033) | | Loss from operations | $(27,682,657) | $(10,432,720) | | Financial investment income | $3,254,400 | $63,381 | | Net loss | $(25,771,982) | $(10,010,008) | | Net loss per share basic and diluted | $(0.09) | $(0.05) | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operations increased substantially to $19.9 million, contributing to a $37.3 million decrease in cash Condensed Consolidated Statements of Cash Flows (For the Three Months Ended March 31) | Cash Flow Item | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(19,891,123) | $(1,868,950) | | Net cash used in investing activities | $(17,543,699) | - | | Decrease in cash and cash equivalents | $(37,308,870) | $(1,868,950) | | Cash and cash equivalents at end of period | $11,837,193 | $12,507,573 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the reverse recapitalization, accounting policy changes, related-party transactions, and a new R$490 million loan facility - The business combination with Zanite Acquisition Corp on May 9, 2022, was accounted for as a reverse recapitalization, with Eve Sub's historical financial statements continuing as the Company's financial statements[33][36] - Effective January 1, 2022, the company switched from a 'management approach' carve-out methodology to a 'legal entity approach' for its financial statements, resulting in a separation-related adjustment to the opening balance sheet[49][52] - On January 23, 2023, Eve Brazil entered into a loan agreement with BNDES for two lines of credit totaling R$490 million (approx. $96 million) to support eVTOL development, though no amount has been drawn as of March 31, 2023[91][94] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its pre-revenue status, rising Q1 net loss driven by R&D and SG&A, and confirms liquidity for the next year Overview and Business Model The company is a development-stage UAM leader with a holistic ecosystem model requiring substantial future capital - Eve's business model is built on four pillars: eVTOL Production and Design, Service and Support, Fleet Operations, and Urban Air Traffic Management (UATM)[139][140][141] - The company has not generated any revenue to date and expects to finance its operations through existing cash, offerings, and debt until its products are commercialized[143] Results of Operations Q1 net loss grew 157% to $25.8 million, driven by a 136% rise in R&D and a 367% increase in SG&A expenses Comparison of Operating Results (Q1 2023 vs. Q1 2022) | Line Item | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $(21,528,338) | $(9,114,687) | $(12,413,651) | 136% | | Selling, general and administrative | $(6,154,319) | $(1,318,033) | $(4,836,286) | 367% | | Loss from operations | $(27,682,657) | $(10,432,720) | $(17,249,937) | 165% | | Net loss | $(25,771,982) | $(10,010,008) | $(15,761,974) | 157% | - The increase in R&D expenses was primarily due to higher headcount and engineering expenses related to prototype development, including costs for batteries, motors, and thermal management systems[175] - The rise in SG&A expenses was largely driven by an increase in team size, consulting services, marketing expenses, and charges under the Shared Service Agreement[176] Liquidity and Capital Resources The company has $294.6 million in liquidity, sufficient for the next twelve months but not for full commercial launch - Total liquidity as of March 31, 2023, was $294.6 million, comprising $11.84 million in cash, $199.12 million in marketable securities, and an $83.64 million related party loan receivable[182] - Current funds are expected to cover operating plans for the next 12 months but are likely insufficient for the full development and commercial launch of the eVTOL aircraft[185] - The company secured credit lines with BNDES for approximately $96 million, adding to total liquidity once drawn[182] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk from Brazilian cash equivalents and foreign currency risk from its BRL-denominated operations - The company faces interest rate risk from cash equivalents in Brazil indexed to the CDI rate[200] - Eve is exposed to foreign currency risk from its Brazilian operations, with 2% of total assets and 15% of total liabilities denominated in Brazilian Reais as of March 31, 2023[203] Controls and Procedures Disclosure controls were deemed ineffective due to unremediated material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to unremediated material weaknesses[207] - Identified material weaknesses include ineffective controls for non-routine/complex transactions, inadequate risk assessment processes, and a lack of sufficient personnel with qualifications for complex accounting[210] - A remediation plan is in progress, involving engaging outside consultants, hiring additional qualified personnel, and enhancing risk assessment and communication processes[211][214] PART II OTHER INFORMATION Legal Proceedings The company is not currently party to any material legal proceedings - As of the report date, Eve is not involved in any material legal proceedings[216] Risk Factors The report refers to the company's Annual Report on Form 10-K/A for a comprehensive discussion of risk factors - For a detailed discussion of risk factors, the report refers to the Company's Annual Report on Form 10-K/A for the year ended December 31, 2022[217] Exhibits This section lists filed exhibits, including corporate documents, a loan agreement, and required officer certifications - The exhibits filed include corporate governance documents, the BNDES Loan Agreement, and required CEO/CFO certifications[224]