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Related Party Transactions
 9 Months Ended
Sep. 30, 2023
Related Party Transactions  
Related Party Transactions

Note 5 – Related Party Transactions

Relationship with Embraer

Prior to the Closing of the transaction with Zanite, Eve Sub was managed, operated, and funded by Embraer. Accordingly, certain shared costs have been allocated to Eve and reflected as expenses in Eve's stand-alone condensed consolidated financial statements. In December 2021, Embraer started charging research and development (“R&D”) and selling, general and administrative (“SG&A”) expenses to Eve through the Master Service Agreement and Shared Service Agreement, respectively. The expenses reflected in the condensed consolidated financial statements may not be indicative of expenses that will be incurred by Eve in the future.


Corporate Costs  Embraer incurs corporate costs for services provided to Eve. These costs include, but are not limited to, expenses for information systems, accounting, treasury, purchasing, human resources, legal, and facilities. These costs benefit Eve, but are not covered under the MSA or SSA. The corporate costs are allocated between the “Research and development” and “Selling, general and administrative” line items of the condensed consolidated statements of operations as appropriate. 


Transaction Costs  During the nine month period ended September 30, 2022, Embraer paid for Transaction Costs attributable to Eve Sub. The Transaction Costs comprise, but were not limited to, costs associated with legal, finance, consulting, and auditing services with the objective to effectuate the transaction with Zanite, as described in Note 1. Expenses directly related to the anticipated closing of the transaction with Zanite were capitalized and the remaining expenses were charged to the statement of operations as SG&A expenses.

 

Master Service Agreement and Shared Service Agreement  In connection with the transfer of the assets and liabilities of the UAM business to Eve Sub, Embraer and Eve Sub entered into the MSA and SSA on December 14, 2021. The initial terms for the MSA and SSA are 15 years. The MSA can be automatically renewed for additional successive one-year periods. The MSA established a fee so that Eve may have access to Embraer’s R&D and engineering department structure, as well as, at Eve’s option, the ability to access manufacturing facilities in the future. The SSA established a cost overhead pool to be allocated, excluding any margin, so that Eve may be provided with access to certain of Embraer’s administrative services and facilities such as shared service centers. In addition, on December 14, 2021, Eve Sub entered into a MSA with Atech Negócios em Tecnologias S.A., a Brazilian corporation (sociedade anônima) (“Atech”) and wholly owned subsidiary of Embraer, for an initial term of 15 years (the “Atech MSA”). Fees under the Atech MSA are for services related to Air Traffic Management, defense systems, simulation systems, engineering, and consulting services.

  

Related Party Receivables and Payables  Certain employees have transferred from Embraer to Eve. On the transfer date of each employee, all payroll related accruals for the employee are transferred to Eve. Embraer is responsible for payroll related costs prior to the transfer date. Eve recognizes a receivable from Embraer for payroll costs incurred prior to the transfer date in the "Related party receivables" line of the condensed consolidated balance sheets. Fees and expenses in connection with the MSA are set to be payable within 45 days after receipt of the invoice by Eve together with documentation supporting the fees and expenses. Costs and expenses incurred in connection with the provision of shared services to Eve pursuant to the SSA are set to be payable within 45 days of receipt by Eve. Services provided under the MSA and SSA are recognized in "Related party payables" within the condensed consolidated balance sheets.

 

Royalty-Free Licenses  Under the MSA and SSA, Eve has a royalty-free license to access Embraer’s intellectual property to be used within the UAM market. 


Leases  Eve enters into agreements with Embraer to lease corporate office space and other facilities. In 2021, Eve Brazil signed an agreement with Embraer to lease two facilities, one in São José dos Campos and another in Gavião Peixoto, both in the state of São Paulo, Brazil. The leases never commenced and were terminated during the second quarter 2023. There were no costs associated with the lease termination. During the period ended September 30, 2023, the Company signed two new leases with Embraer for different sites. The São José dos Campos lease commenced on June 12, 2023. At lease commencement, a right-of-use (“ROU”) asset and operating lease liabilities of $338,006 were recognized in the “Right-of-use assets, net”, “Other current payables”, and “Other non-current payables” lines of the condensed consolidated balance sheets. The lease for the Gavião Peixoto site has not commenced as of September 30, 2023.


Related Party Loan  On August 1, 2022, the Company entered into a loan agreement (the “Loan Agreement”) with EAH, a wholly owned U.S. subsidiary of Embraer, in order to efficiently manage the Company’s cash at a rate of return that is favorable to the Company for an  initial term of 12 months. On August 1, 2023, Eve and EAH agreed to amend the Loan Agreement ("Amended Loan Agreement") to extend the term an additional 12 months to August 1, 2024 and increase the interest rate to 5.97% per annum. The aggregate principal amount remains to be up to $81,000,000. All accrued interest prior to the amendment was paid. The date may be extended upon mutual written agreement by the Company and Embraer. Any outstanding principal amount under the Loan Agreement may be prepaid at any time, in whole or in part, by EAH at its election and without penalty. The Company may request full or partial prepayment of any outstanding principal amount under the Loan Agreement at any time.

 

Related Party Expenses


The following table summarizes the related party expenses for the presented periods:

 
Three Months Ended
Nine Months Ended


September 30,

September 30,



2023


2022


2023


2022
Research and development
$ 20,955,523

$ 11,327,149

$ 53,363,778

$ 27,555,717
Selling, general and administrative

664,874


502,636


2,157,575


7,707,429
Total
$
 21,620,397

$
 11,829,785

$
 55,521,353

$
 35,263,146