EX-99.4 10 ex994_4.htm EXHIBIT 99.4



Exhibit 99.4

EVE UAM, LLC

(Former UAM Business of Embraer S.A.)

Unaudited Condensed Consolidated Financial Statements

as of and for the three months ended March 31, 2022 and 2021


 



Unaudited Condensed Consolidated Financial Statements: 3
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021  4
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 5
Unaudited Condensed Consolidated Statements of Changes in Net Parent Equity for the Three Months Ended March 31, 2022 and 2021 6
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 7
Notes to Unaudited Condensed Consolidated Financial Statements 8


 

2



EVE UAM, LLC

(FORMER UAM BUSINESS OF EMBRAER S.A.)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In US Dollars)


As of March 31, 2022       As of December 31, 2021  
As Restated       As Restated  
Assets                 
Current:             
      Cash and cash equivalents     $  12,507,573      $ 14,376,523  
      Related party receivable        162,679        220,000  
      Other current assets  ​​  ​​  7,508,457    6,274,397
Total current assets  ​​  ​​  20,178,709        20,870,920  
      Capitalized software, net        -      699,753
Total assets    $  20,178,709      $ 21,570,673  
Liabilities and Net parent equity          
Current:                   
     Accounts payable     $  60,816    $ 877,641
     Related party payable      17,993,715       8,642,340  
     Derivative financial instruments       -    32,226
     Other payables      972,641        616,156  
Total current liabilities      19,027,172      10,168,363
     Other noncurrent payables     405,000       702,921  
Total liabilities        19,432,172      10,871,284
Net parent equity                
Net parent investment     746,537       10,731,615  
Accumulated other comprehensive income/(loss)   -   (32,226 )
Total Net parent equity     746,537       10,699,389  
Total liabilities and Net parent equity    $  20,178,709    $ 21,570,673
 

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



EVE UAM, LLC

(FORMER UAM BUSINESS OF EMBRAER S.A.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In US Dollars)

 

    Three Months Ended March 31, 
  2022
2021
      As Restated
  As Restated
Operating expenses          
       
Research and development     $  (9,114,687 )
$  (1,891,651 )
General and administrative        (1,318,033 ) 
   (620,247 )
    Operating loss        (10,432,720 ) 
   (2,511,898 )
Financial and foreign exchange gain, net        422,712
   2,474
    Loss before income taxes         (10,010,008 ) 
   (2,509,424 )
Income tax benefit (expense)        -
   -
    Net loss     $  (10,010,008 ) 
$  (2,509,424 )
Net loss per unit basic and diluted (9,100 )
(2,281 )
Weighted-average number of units outstanding – basic and diluted     1100  
  1100  

 

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



EVE UAM, LLC

(FORMER UAM BUSINESS OF EMBRAER S.A.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


(In US Dollars)


    Three Months Ended March 31, 
  2022
2021
      As Restated

As Restated
Net loss     $ (10,010,008 )   $  (2,509,424 )
    Derivative financial instruments - cash flow hedge       -
   (51,106 )
Total comprehensive loss     $  (10,010,008 )
  $  (2,560,530 )

  

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


5



EVE UAM, LLC

(FORMER UAM BUSINESS OF EMBRAER S.A.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET PARENT EQUITY

(In US Dollars)

    Net parent investment     Accumulated other comprehensive income (loss)     Total 
Balance as of December 31, 2021  (as restated)   $  10,731,615     $ (32,226 )    $ 10,699,389  
     Legal entity change separation-related adjustments   (707,846 )   32,226   (675,620 )
Balance as of January 1, 2022  (as restated)     10,023,769      

-

      10,023,769  
   Net loss (as restated)    (10,010,008 ) -    (10,010,008 )
   Net transfer from Parent      732,776       -        732,776  
Balance as of March 31, 2022  (as restated) $ 746,537 $ - $ 746,537













Balance as of December 31, 2020  $  (1,059,291 ) $ 45,438 $ (1,013,853 )
   Net loss (as restated)      (2,509,424 )     -        (2,509,424 )
   Other comprehensive loss     - (51,106 )    (51,106 )
   Net transfer from Parent       3,004,907       -        3,004,907  
Balance as of March 31, 2021 (as restated) $  (563,808 ) $ (5,668 $ (569,476 )


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

 

6



EVE UAM, LLC

(FORMER UAM BUSINESS OF EMBRAER S.A.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US Dollars)

 


Three Months Ended March 31, 
    2022      2021
      As Restated     As Restated   
Cash flows from operating activities:                  
  
Net loss     $  (10,010,008 ) $  (2,509,424 )
Adjustments to reconcile net loss to net cash used in operating activities:       
       
  
   Amortization of capitalized software        -       33,963   
   Long-term incentive plan expense        -         32,088  
   Carve-out expenses (contributed from Parent)(i) 732,769 -
Changes in operating assets and liabilities:       
       
  
   Other assets        (1,242,627 )    (804,058 )
   Related party receivable        57,321         -  
   Accounts payable        (98,593 )    (752,401 )
   Related party payable     8,241,343       1,088,362  
   Other payables        450,845
   23,690   
Net cash used in operating activities        (1,868,950 )      (2,887,780 )
Cash flows from investing activities:             
  
    Capitalized Software, net

-


-
Net cash provided by investing activities

-


-
Cash flows from financing activities: 







   Transfer from Parent        -         2,887,780   
Net cash provided by financing activities        -
     2,887,780   
Increase (decrease) in cash and cash equivalents   (1,868,950 )   -
Cash and cash equivalents at the beginning of the period        14,376,523        -   
Cash and cash equivalents at the end of the period     $  12,507,573    $  -   
Supplemental disclosure of other noncash investing and financing activities       
       
  
   Additions to capitalized software transferred by Parent    $ - $ 117,127   

 

(i) More details in Note 4

 

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

 

7


 

EVE UAM, LLC

(FORMER UAM BUSINESS OF EMBRAER S.A.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in US Dollars)

 

  1. Formation and Nature of Business

 

Formation and Nature of Business

 

EVE UAM, LLC (f/k/a Eve Urban Air Mobility Solutions, Inc.), a Delaware limited liability company (the “Company” or “Eve”), was formed on April 21, 2021, in order to effect a reorganization and acquire the Urban Air Mobility (“UAM”) business, which focuses on the development and certification of an electric vertical takeoff and landing vehicle (“eVTOL”), the creation of a maintenance and services network for eVTOL and the creation of an air traffic management system for eVTOL otherwise known as Urban Air Traffic Management (“UATM”) (collectively, the “UAM Business”), from Embraer S.A. and its subsidiaries (the “Parent”, “Embraer” or “ERJ”). Prior to the reorganization and throughout the periods presented herein, the UAM Business was owned by ERJ and its subsidiaries. Beginning in August 2021, ERJ has contributed certain assets and employees to Eve to begin Eve’s initial operations.  

ERJ is a publicly held company incorporated under the laws of the Federative Republic of Brazil (“Brazil”) with headquarters in São José dos Campos, State of São Paulo. The corporate purpose of ERJ is: 

 

(i)

To design, build and market aircraft and aerospace materials and related accessories, components and equipment, according to the highest standards of technology and quality.

 

(ii)

To perform and carry out technical activities related to the manufacturing and servicing of aerospace materials.

 

(iii)

To contribute to the training of technical personnel as necessary for the aerospace industry.

 

(iv)

To engage in and provide services for other technological, manufacturing and business activities in connection with the aerospace industry.

 

(v)

To design, build and trade in equipment, materials, systems, software, accessories and components for the defense, security and power industries, and to promote and carry out technical activities related to the manufacturing and servicing thereof, in accordance with the highest technological and quality standards.

 

(vi)

To conduct other technological, manufacturing, trading and services activities related to the defense, security and power industries.

Through EmbraerX, an independent department within ERJ, ERJ’s market accelerator and disruptive business innovation company, ERJ incubates initiatives that may mature into new business opportunities in the future. One such business that has been incubated is ERJ’s UAM business. The UAM Business had historically operated as part of ERJ and not as a separate stand-alone entity or group.

The Reorganization

On December 10, 2021, ERJ, Eve and Embraer Aircraft Holding Inc. (“EAH”), a wholly owned subsidiary of ERJ, entered into a contribution agreement (the “Contribution Agreement”), pursuant to which, upon the terms and subject to the conditions of the Contribution Agreement, ERJ transferred certain assets and liabilities related to the UAM Business to Eve or to Eve Soluções de Mobilidade Aérea Urbana Ltda., a Brazilian limited liability company (sociedade limitada) and a newly formed direct wholly owned subsidiary of Eve (the “Brazilian Subsidiary”), in exchange for the issuance of 1,000 common units of Eve. Since the consummation of the transactions contemplated by the Contribution Agreement (the “Reorganization”), certain assets and liabilities related to the UAM Business have been owned by Eve.

Business Combination Agreement with Zanite

On December 21, 2021, ERJ, Eve and EAH entered into a business combination agreement (the “Business Combination Agreement”) with Zanite Acquisition Corp. (“Zanite” or following its name change to “Eve Holding, Inc.” upon the Closing (as defined below), “Eve Holding”). Pursuant to the Business Combination Agreement, among other things, EAH contributed and transferred to Zanite all of the common units of Eve held by it as consideration and in exchange for the issuance and transfer by Zanite to EAH of 220,000,000 shares of common stock of Zanite. Upon the consummation of the transactions contemplated by the Business Combination Agreement (the “Closing”), which occurred on May 9, 2022, Eve now operates as part of a separate, independent, publicly traded company. 

 

EAH did not lose control over Eve since it holds approximately 90,2% of  Eve Holding’s outstanding shares of common stock as of immediately after the Closing. Therefore, the transaction did not result in a change in control that would otherwise necessitate business combination accounting.

 

8


COVID-19 Pandemic

The World Health Organization declared a global emergency on January 30, 2020 with respect to the outbreak of a novel strain of coronavirus, or COVID-19 pandemic. There are many uncertainties regarding the current global COVID-19 pandemic, and ERJ is closely monitoring the COVID-19 pandemic situation and its impacts on its employees, operations, the global economy, the supply and the demand for its products and services, including the UAM Business. ERJ implemented contingency plans to act as quickly as necessary as the current situation unfolds.

Since the beginning of the COVID-19 pandemic, ERJ has been engaging in several initiatives supporting the health and safety of its employees. Social distancing measures were taken, as well as the implementation of working from home for certain group of employees. Furthermore, several measures to preserve jobs were taken, including reductions in working hours and pay cuts, collective vacations, and temporary furloughs.

The full impact of the COVID-19 pandemic continues to evolve as of the date hereof. As such, it is uncertain as to the full magnitude that the pandemic will have on the UAM Business’s financial condition, liquidity, and future results of operations. Management is actively monitoring the situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.

 

  1. Restatement of Previously Reported Financial Statements

 

The Company reviewed, changed the accounting, and restated these financial statements for costs incurred (Transaction Costs) in connection with the transaction with Zanite which include among other things fees for financial, accounting and legal advisors. These costs were paid by ERJ and EAH and recognized by these entities and not pushed down to Eve. The Company concluded that the Transaction Costs that were directly related to Eve's business should follow the guidance in SEC Staff Accounting Bulletin Topic 5.T, Accounting for Expenses or Liabilities Paid By Principal Stockholder(s), and should be pushed down to Eve’s financial results in 2022 and 2021.

 

Management analyzed the nature and timing of the costs to determine whether they were i) directly related to the carve-out structuring and reporting preparation and ii) directly related to the anticipated closing of the transaction with Zanite. During the three months period ended March 31, 2022, the Transaction Costs that benefited Eve amounted to $1.6 million and management restated their payables balance, increasing the balance by this amount, as of March 31, 2021. Of the $1.6 million, $1.1 million was deferred and recognized as Other assets as those Transaction Costs are directly related to the anticipated Closing of the transaction with Zanite.

 

The remaining Transaction Costs of $0.5 million were expensed as they were not directly related to the anticipated Closing.


The adjustment in the statement of operations related to the Transaction Costs for the first, second, third and fourth quarters of 2021 were $0.3 million, $1.3 million, $0.4 million and $0.4 million, respectively.  See more details in Note 11.

 

The Condensed Consolidated Financial Statements for the three months ended March 31, 2022 and related disclosures (Notes 4, 6 and 11) have been restated in accordance with the changes described above.


UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


As of March 31, 2022  
As Reported      

Restatement Adjustments

      As Restated  
Assets                         
Current:             
      Cash and cash equivalents     $  12,507,573      $ -     $ 12,507,573  
      Financial investments - - -
      Related party receivable        162,679        -       162,679  
      Other current assets  ​​  ​​  129,218                7,379,239 7,508,457
Total current assets  ​​  ​​  12,799,470        7,379,239       20,178,709  
      Capitalized software, net        -      -   -
Total assets    $  12,799,470      $ 7,379,239     $ 20,178,709  
Liabilities and Net parent equity          
Current:                           
     Accounts payable     $  60,816    $ - $ 60,816
     Related party payable      7,716,126                 10,277,589       17,993,715  
     Derivative financial instruments       -    - -
     Other payables      972,641        -       972,641  
Total current liabilities      8,749,583      10,277,589   19,027,172
     Other noncurrent payables     405,000       -       405,000  
Total liabilities        9,154,583      10,277,589   19,432,172
Net parent equity                        
Net parent investment            3,644,887                  (2,898,350 )      746,537  
Accumulated other comprehensive income/(loss)   -   -   -
Total Net parent equity     3,644,887               (2,898,350 )      746,537  
Total liabilities and Net parent equity     $  12,799,470    $ 7,379,239 $ 20,178,709



9


 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



    Three Months Ended March 31, 2022 


Restatement

 
   

As Reported

 

Adjustments

  As Restated  
Operating expenses           

 

     
Research and development     $  (9,114,687 )
$ -

$  (9,114,687 )
General and administrative        (808,766 )

(509,267 )
  (1,318,033 ) 
    Operating loss        (9,923,453 )

(509,267

)

  (10,432,720 ) 
Financial and foreign exchange gain, net        422,712



  422,712
    Loss before income taxes        (9,500,741 )

(509,267 )
  (10,010,008 )
Income tax benefit (expense)        -

-

  -
    Net loss     $  (9,500,741 )
$ (509,267 )
$  (10,010,008 ) 
Net loss per unit basic and diluted (8,637 )

-

(9,100 )
Weighted-average number of units outstanding – basic and diluted     1100  

-

  1100  

 


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


 

    Three Months Ended March 31, 2022 
 

As Reported

Restatement

Adjustments

 

As Restated

Cash flows from operating activities:                                
Net loss     $  (9,500,741 ) $  (509,267 ) $  (10,010,008 )
Adjustments to reconcile net loss to net cash used in operating activities:       
      
      
  
   Carve-out expenses (noncash, contributed from Parent)(i) 732,769 -
732,769
Changes in operating assets and liabilities:       
               
  
   Other assets        (116,645 ) (1,125,982 )    (1,242,627 )
   Related party receivable        57,321        -         57,321  
   Accounts payable        (98,593 ) -
    (98,593 )
   Related party payable      7,716,126        525,217        8,241,343  
   Other payables        (659,187 )   1,110,032    450,845   
Net cash used in operating activities        (1,868,950 )     -        (1,868,950 )
Cash flows from investing activities:












Net cash provided by investing activities

-


-


-
Cash flows from financing activities:       

  
  
Net cash provided by financing activities        -       -        -   
Increase (decrease) in cash and cash equivalents    (1,868,950 )   -   (1,868,950 )
Cash and cash equivalents at the beginning of the period        14,376,523       -        14,376,523   
Cash and cash equivalents at the end of the period     $  12,507,573    $  - $  12,507,573   
Supplemental disclosure of other noncash investing and financing activities                              
  
   Additions to capitalized software transferred by Parent     $ - - $ -   


Note: The cash flow restatement related adjustments directly relate to the adjustment noted above that also impacted the statement of operations.




10



The Unaudited Condensed Combined Financial Statements for the three months ended March 31, 2021 and related disclosures in this Amendment to the Form 8-K have been restated in accordance with the changes described above. 



UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS


  Three Months Ended March 31, 2021 



Restatement

 
    As Reported  

Adjustments

  As Restated  
Operating expenses           

 

     
Research and development     $  (1,891,651 )
$ -

$  (1,891,651 )
General and administrative        (327,943 )

(292,304 )
  (620,247 ) 
    Operating loss        (2,219,594 )

(292,304

)

  (2,511,898 ) 
Financial and foreign exchange gain, net        2,474



  2,474
    Loss before income taxes        (2,217,120 )

(292,304 )
  (2,509,424 ) 
Income tax benefit (expense)        -

-

  -
    Net loss     $  (2,217,120 )
$ (292,304 )
$  (2,509,424 ) 
Net loss per unit basic and diluted (2,016 )

-

(2,281 )
Weighted-average number of units outstanding – basic and diluted     1100  

-

  1100  

 


11



UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS



  Three Months Ended March 31, 2021 
 


Restatement

 





As Reported


Adjustments


As Restated
Cash flows from operating activities:                                
Net loss     $  (2,217,120 ) $  (292,304 ) $  (2,509,424 )
Adjustments to reconcile net loss to net cash used in operating activities:       
      
      
  
   Amortization of capitalized software 33,963 -
33,963
   Long-term incentive plan expense

32,088


-


32,088

Changes in operating assets and liabilities:       
               
  
   Other assets        (8,000 ) (796,058 )    (804,058 )
   Related party receivable        -        -         -  
   Accounts payable        (752,401 ) -
   (752,401 )
   Related party payable     -       1,088,362       1,088,362  
   Other payables        23,690
  -    23,690   
Net cash used in operating activities        (2,887,780 )     -        (2,887,780 )
Net cash provided by investing activities

-


-


-
Cash flows from financing activities:       

  
  
   Transfer from Parent

2,887,780



-


2,887,780
Net cash provided by financing activities        2,887,780       -        2,887,780   
Increase (decrease) in cash and cash equivalents   -
  -   -
Cash and cash equivalents at the beginning of the period        -       -        -   
Cash and cash equivalents at the end of the period     $  -    $  - $  -   
Supplemental disclosure of other noncash investing and financing activities                              
  
   Additions to capitalized software transferred by Parent     $ 117,127 - $ 117,127   


Note: The cash flow restatement related adjustments directly relate to the adjustment noted above that also impacted the statement of operations. 

 

Please refer to the Audited Combined Financial Statements of the Urban Air Mobility Business of Embraer S.A. as of and for the years ended December 31, 2021 and 2020, as restated, in Exhibit 99.2 of this filing, for restatement adjustments impacting the December 31, 2021 consolidated balance sheet. 


12



  1. Liquidity

Prior to December 21, 2021 the UAM Business was part of EmbraerX, an independent department within ERJ, and certain funds to conduct its research and development (“R&D”) operations were provided by ERJ. Eve has not generated any revenues and does not anticipate generating any revenues unless and until it successfully completes research and development for the eVTOL and UATM projects, or any future product candidate. On May 9, 2022, Eve concluded the transaction with Zanite as per the Business Combination Agreement and as a result received more than $300 million in cash which will provide sufficient capital to support the ongoing operations of Eve. Therefore, the agreement between Eve and ERJ by which ERJ guaranteed to fund Eve for the next 12 months is no longer effective.


  1. Summary of Significant Accounting Policies 

Basis of Presentation

Prior to the separation from ERJ, Eve Sub has historically operated as part of ERJ and not as a standalone company. The audited combined financial statements for the periods ended on or prior to December 31, 2021, have been derived from ERJ and EAH historical accounting records and are presented on a carve-out basis. As of January 1, 2022, Eve Sub began accounting for its financial activities as an independent entity.

The balances of Eve Soluções de Mobilidade Aérea Urbana Ltda. ("Eve Brazil"), a direct wholly owned subsidiary of Eve, that were recorded in foreign currency, were converted/translated into its functional currency, the US dollar, before being presented in the combined financial statements.

ERJ started charging the UAM business related R&D and G&A expenses to Eve through the Master Service Agreement (the "MSA") and Shared Service Agreement (the "SSA"). Therefore, there was no need to continue carving out expenses from ERJ and EAH.

All intercompany transactions’ balances between Eve Sub, and Eve Brazil (collectively, the "Eve Entities") were eliminated.

13


Eve's audited combined financial statements as of December 31, 2021 reflect the assets, liabilities, and expenses that management has determined to be specifically attributable to Eve, as well as allocations of certain corporate level assets, liabilities and expenses, deemed necessary to fairly present the financial position, results of operations and cash flows of Eve, as discussed further below. Management believes that the assumptions used as basis for the allocations of expenses, direct and indirect, as well as assets and liabilities in the unaudited condensed combined financial statements are reasonable. However, these allocations may not be indicative of the actual amounts that would have been recorded had Eve operated as an independent, publicly traded company for the periods presented.

Historically, the UATM and eVTOL initiatives have been incubated, led and funded as two separate projects, which were comprised of separate related designs and registered patents (the “Intellectual Property” or “IP”), know-how, and principal design teams. As a part of ERJ, Eve was dependent upon ERJ for all of its working capital and financing requirements, as ERJ uses a centralized approach for cash management and financing its operations. Accordingly, cash and cash equivalents, debt or related interest expense have not been allocated to the Eve in the unaudited condensed combined financial statements. Financing transactions related to Eve were accounted for as a component of Net Parent Investment in the unaudited condensed combined balance sheets and as a financing activity on the accompanying unaudited condensed combined statements of cash flows. 

Change in carve-out methodology

As of the Closing, ERJ concluded that all the assets and liabilities of the newly created Eve legal entity were contributed by the parent company ERJ. No other assets or liabilities were evaluated to be attributable to Eve or that would be transferred to Eve upon the completion of the Business Combination, eliminating the necessity to allocate a portion of ERJ’s assets and liabilities to Eve on a carve-out basis. Management deemed it to be more appropriate to adopt a legal entity approach since all the activities reside in the Eve legal entity, and there is no longer a need to allocate assets and liabilities from the Parent for the carve-out in the form of the management approach.

The management approach takes into consideration the assets that are being transferred to determine the most appropriate financial statement presentation. A management approach may also be appropriate when a parent entity needs to prepare financial statements for the sale of a legal entity, but prior to divestiture, certain significant operations of the legal entity are contributed to the parent in a common control transaction. On the other hand, the legal entity approach is often appropriate in circumstances when the transaction structure is aligned with the legal entity structure of the divested entity. One example would be when shares of a legal entity or a consolidated group of legal entities are divested. If the legal entity approach is deemed appropriate, all historical results of the legal entity, including those that are not ultimately transferred, should be presented in the historical financial statements through the date of transfer.

The management approach, which was undertaken to prepare the financial statements of the UAM Business for the fiscal year ended 2021, was appropriate and based on the best information and assumptions available at the time. Management now deems it appropriate to change the carve-out methodology from the management approach to the legal entity approach as of January 1, 2022. As such, in order to prepare the financial statements for the first quarter of 2022, the Company has applied the legal entity approach due to changes in the underlying facts and circumstances.

On December 14, 2021, the Company signed with ERJ the Master Service Agreement (“MSA”) and the Services Shares Agreement (“SSA”), which charges Eve for a significant part of the expenses Eve was previously carving out. In this regard, Management understands that the expenses not covered by the agreements, the minor part of the expenses previously carved-out, comprised of general overhead expenses, still need to be allocated to Eve in order to better present its results on a stand-alone basis. With respect to the MSA and SSA, refer to Note 5, Related Party Transactions.

Since the financial activities from December 10, 2021 to December 31, 2021 were immaterial, Management chose to continue with the management approach for all of the year ended December 31, 2021 and began the to use the legal entity approach as of January 1, 2022. Management continued to use the legal entity approach until the Closing on May 9, 2022. The Company has recorded the impacts of the balance sheet adjustment (i.e. separation-related adjustment) for the change in methodology as adjustments to the January 1, 2022 beginning balance sheet and not as a period activity attributable to the three month ended March 31, 2022.  The January 1, 2022 beginning balance sheet adjustments from the December 31, 2021 balances were as follows:

14


Separation-related adjustments


As of December 31, 2021

As Restated


Separation-Related

Adjustment 

As of January 1, 2022

As Restated

Assets        
           
Current:
Cash and equivalents   $ 14,376,523  
$                           (8 )   $ 14,376,515  
Related party receivable 220,000
- 220,000
Other current assets     6,274,397  
                     (8,567 )     6,265,830  
Total current assets   20,870,920
   (8,575 )   20,862,345
Capitalized software, net     699,753  
  (699,753 )     -  
Total assets   21,570,673
  (708,328 )   20,862,345
Liabilities and Net Parent Equity        
             
Current:
Accounts payable     877,641  
  (718,232 )     159,409  
        Related party payable (As Restated)     8,642,340  
  1,110,032       9,752,372  
Derivative financial instruments 32,226
(32,226 ) -
Other payables (As Restated)     616,156  
  (94,361 )      521,795  
Total current liabilities   10,168,363
  265,213   10,433,576
Other noncurrent payables     702,921  
  (297,921 )     405,000  
Total liabilities   10,871,284
  (32,708 )   10,838,576
Net parent equity        
             
Net parent investment 10,731,615
(707,846 ) 10,023,769
Accumulated other comprehensive income/ (loss)

(32,226 ) 
  32,226       -  
Total net parent equity   10,669,389
  (675,620 )   10,023,769
Total liabilities and net parent equity
$ 21,570,673  
$ (708,328 )   $ 20,862,345  

Therefore, Management considers the legal entity approach to be the most meaningful representation of Eve’s standalone carve-out financial statements. Additionally, intercompany transactions between Eve entities (i.e EVE UAM, LLC and Eve Soluções de Mobilidade Aerea Urbana Ltda) have been eliminated in the consolidation. 

The change in the carve-out approach impacted the unaudited condensed combined statements of cash flow for the three months ended on March 31, 2022. Amounts that were previously presented as Transfer from Parent to Eve are now presented as a noncash item contributed by Parent to Eve.

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For periods ended as of or prior to December 31, 2021, the unaudited condensed combined financial information includes both direct and indirect expenses. The historical direct expenses consist primarily of personnel-related costs (including salaries, labor taxes, profit sharing program, benefits, short and long-term incentive) of research and development employees directly involved in UAM activities, research expenses, facilities depreciation and others. The indirect expenses consist of personnel-related costs (including salaries, labor taxes, profit sharing program, benefits, short and long term incentive) allocated to Eve and general and administrative overhead, including expenses for information systems, accounting, other financial services (such as treasury, audit and purchasing), human resources, legal, and facilities, allocated as per headcount of employees exclusively involved in UAM activities compared to the total headcount of all ERJ employees or using an expense input comparing the total R&D expenses of Eve against the total R&D expenses of EmbraerX. Eve has calculated its income tax amounts using a separate return methodology and it has presented these amounts as if it were a separate taxpayer from ERJ.

For periods ended as of or prior to December 31, 2021, the unaudited condensed combined balance sheets of Eve include other assets, capitalized software, accounts payable and other payables that were allocated on a specific identification basis. Derivative instruments used to hedge the salaries for employees directly involved in UAM activities were allocated by comparing the salaries of these employees in Brazilian reais (“BRL” or “R$”) against the total employees’ salaries of ERJ in BRL, and for employees not directly involved in UAM activities the expense input approach using R&D metrics, noted above, was used to allocate the Derivatives instruments. Incentive payments received in advance, which were related to service arrangements to process employee payroll were allocated based on a headcount proportion basis. As Eve was not historically held as a single legal entity, Net Parent Investment is shown in lieu of stockholder's equity in the unaudited condensed combined financial statements. Net Parent Investment represents the cumulative investment by ERJ in Eve through the dates presented, inclusive of operating results.

Functional and reporting currency

The unaudited condensed combined financial statements are derived from ERJ financial statements and from the financial statements of certain of ERJ’s U.S. based subsidiaries (“Original Financial Statements”). The functional currency of ERJ and the aforementioned subsidiaries is the US Dollar (“USD” or “Dollar” or “US$”). The Company’s functional currency will follow the determination of the functional currency of the Original Financial Statements, therefore management has concluded that the USD is the functional and reporting currency of Eve.

The foreign currency gains and losses are related to transactions with suppliers recognized in the functional currency, USD, but settled in BRL. The impacts were recognized in the line item entitled, Financial and foreign exchange gain, net” within the unaudited condensed combined statements of operations.

Use of Estimates

The preparation of the unaudited condensed combined financial statements in conformity with 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. Therefore, estimates and assumptions derived from past experience and other factors deemed relevant were used in preparing accompanying unaudited condensed combined financial statements. These estimates and assumptions are reviewed on an ongoing basis and the changes to accounting estimates are recognized in the period in which the estimates are revised on a prospective basis. Actual results could be materially different from those estimates. Significant estimates inherent in the preparation of the unaudited condensed combined financial statements include, but are not limited to, useful lives of capitalized software, net, accrued liabilities, income taxes including deferred tax assets and liabilities.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, bank deposits and highly liquid short-term investments, usually maturing within 90 days of the investment date, readily convertible into a known amount of cash and subject to an insignificant risk of change in value.

Fair Value Measurements

Eve applies the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, which defines a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurements. The provisions of ASC 820 relate to financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1