Market Development

UBCO launched its first Utility Electric vehicle in its home market of New Zealand in 2016. The bike was named the 2x2 for the two hub motors in its front and rear wheels which enabled better traction and more torque in off-road conditions. The first 2x2s were used primarily in agriculture and farming, including dairy, drystock, horticulture, viticulture and forestry. Initial production runs sold out quickly and UBCO established good credentials and a global following in this market.

By 2017, customers indicated the desire for a road legal version of the 2x2. UBCO then launched the Dual-Purpose 2x2, built on the same chassis, but designed for road legal compliance with the United States Federal Motor Vehicle Safety Standards (FMVSS) and the European ECE Whole of Vehicle Type Approval (WVTA). Compliance with these two standards provides general global compliance enabling other markets to be entered more easily downstream. With the Dual-Purpose 2x2, UBCO entered the United States and Australian markets in 2018 and will enter Europe in 2019.

The introduction of the Dual-Purpose 2x2 expanded opportunities in the recreational and commercial sectors which are the two largest sectors within the off-road vehicle market. Though the bike is built for off-road usage, customers greatly appreciated the ability to ride it on roads as a licensed vehicle where required.

Recreational usage includes hunting, camping, RV touring and recreational riding. Recreation is expected to be a key sector for UBCO especially in the United States, where 40% of the market is off-road recreational. Commercial usage includes UBCO’s initial market of agriculture but has quickly grown to include commercial fleets for postal services, bike rental and sharing services, tourism, conservation, civic service operations and delivery operations.

UBCO has planned entry into the UTV market in 2021 with the 4x4, a four-wheel UEV (Side by Side). This is targeted at increasing our range of products and our total addressable market. UTVs also command higher per vehicle average accessory sales of US$920 compared to US$200-US$300 for motorcycles and ATVs.

UBCO has grown rapidly over the last 12 months through the launch of the 4th Generation 2x2 with a user controlled application along with a suite of accessories that expand on the products use. It has also built a more expansive dealer network that can deliver increased sales and awareness.

Global Sales Channels

UBCO currently sells products through distributors in 3 geographies: New Zealand, Australia and the United States. Each distributor sells to a network of UBCO-approved dealers. To date there are 91 dealers selling UBCO 2x2s and products globally.

Within 5 years UBCO plans to grow its global presence, resulting in three geographical territories:

• North America (United States and Canada)
• Europe (EU, UK, Norway and Switzerland)
• Australasia (Australia and New Zealand)

Our intent is to have a minimum of one distributor in each region managing vertical market focused dealer networks across their defined geographies.

We have five strategic objectives across all three regions:

1. Extend Geographical Reach by expanding and adding distribution and dealer networks
2. Grow Customer Base across each category of customer, ie Individual, Corporate and Government
3. Develop and Add Channels including distributors, dealer networks, internal direct sales capabilities and an eCommerce platform that complements dealer and direct sales efforts
4. Develop Vertical Markets, specifically:
   1. Agriculture
   2. Tourism, Adventure and Recreation
   3. Conservation, Parks and Forests
5. Build Capability to Sell All Products within the channel(s), through traditional sales and eCommerce

Our general philosophy is to establish distribution partnerships that will endure for the long term. UBCO is committed to the highest standards of customer satisfaction and safety globally. This commitment is reflected in our approach to training and customer service across all stakeholder groups, and we expect our channel partners to represent UBCO in the same vein. Given that, our selection and onboarding process for distributors and dealers is rigorous, but once part of the UBCO team, we are committed to ensuring success for all parties.

Distribution & Sales Model

UBCO operates a mixed distribution model and has a multi-channel approach to sales. Typically, this will involve:

Distribution

In New Zealand, UBCO performs the role of National Distributor and predominantly wholesale to an approved network of dealers.

In all other markets product is imported and sold by an independent distributor or distributors, who directly sell into a dealership network.

Independent Distribution

These distributors purchase product wholesale DAP or FOB from UBCO and manage the territory granted in their distribution agreement. They will be the importer of record for any road registrable product with the national regulator.

UBCO works with each distributor to set Manufacturer Suggested Retail Pricing (MSRP). The distributor will in turn establish selling prices in the market for their dealer network.

The conventional structure of distribution margins to date are as follows:

• Core products will typically be sold at between 20 to 25% discount off dealer pricing;
• Spare parts will typically be sold at an average discount, across all markets, of 33% off dealer pricing;
• Accessories will typically be sold at an average discount, across all markets, of 36% off dealer pricing.

These margins may vary country to country depending on the selling model. UBCO seeks to provide price relativity across the different markets whilst taking into account market specific factors.

Direct Distribution

New Zealand is the home market and provides an ideal test bed with a very diverse range of climates and geographies to test on within a relatively compact land mass. It also has applications which offer some of the highest duty environments possible for product testing.

New Zealand has a simple regulatory and compliance environment that enables rapid testing and adoption of innovative technology and products in a low compliance environment (right through to retail). UBCO considers it strategically important to own and control this market to enable a close relationship with customers.

Importation, warehousing, technical, management, regulatory, compliance and sales teams are established across all three countries.

Dealer

Dealer margins are set by the distributor but take into account the MSRP established with UBCO. The average dealer margins across territories to date are as follows:

• Core products sold to dealers, across all markets, at our existing dealer discount off MSRP of 20%;
• Spare parts and accessories sold to dealers, across all markets, at our existing average dealer discount off MSRP of 35%.

Our US Market Focus

Globally the US market was isolated as the largest potential market for a high value off road UEV. There is a large pool of users with a fleet (10m+) that has not been electrified. With limited competition and investment in the off road space UBCO has identified this as the Blue Ocean opportunity.

Through analysis and in market experience UBCO narrowed its initial focus to the US off road recreational market. Two thirds of all motorbikes, All-Terrain Vehicles (ATVs) and Utility Task Vehicles (UTV) market are used off road and 70% of these users are recreational.

It is likely that through this UBCO would sell into the agricultural and farming market in the US organically due to product exposure. UBCO has planned entry into the UTV market in 2021 with a four wheel UEV (Side by Side). This is targeted at increasing our range of product and our total addressable market. UTVs command higher per vehicle average accessory sales of over $900 USD compared to over $200 USD for Dual Purpose motorcycles.

Channel to Market

UBCO currently distributes through a network of approved dealers in the US market and globally. In the US there are approximately 9,749 motorbike and ATV retail outlets, with almost half (4,606) focusing on new vehicle sales and the remainder (5,144) on used motorbikes & ATVs.

The US market is regulated at the top level by the Consumer Product Safety Commission (CPSC) and EPA for off road, with the National Highway Safety Transportation Authority (NHTSA) governing on road use. Each state also has specific regulations around the sale and purchase of motor vehicles through the Department of Motor Vehicles (DMV). Collectively these create reasonable barriers to entry for newcomers.

Competitive Landscape

There are six dominant companies in the US market across all the categories of motorcycles. These are all internal combustion engine (ICE) companies:

Polaris, John Deere, Honda, Yamaha, Can- nam, and Harley Davidson. We compete directly against: Polaris, John Deere, Yamaha, Can-am, and Honda. Some of these companies have electric vehicle programs commercially (Polaris) but these are still in their infancy.

Electric Vehicle Brands operate at significantly lower volumes in the US market currently. Key competitors in the electric motorcycle space include: Zero Motorcycles, Alta Motorcycles, and GenZe. Both Zero and Alta offer higher power motorcycles with higher costs whilst GenZe (Mahindra) offer a more affordable traditional scooter/moped option. Textron currently offer electric buggies which compete in the UTV and off road segment through several brands they own.

Electric bicycles cross over into the EV space with on and off road offers which can provide speeds up to 45kph but have variable legislation in the US across jurisdictions.

Competitive Advantage

UBCO has been able to create a clear value proposition over and above other players in our current markets. From an operational and product perspective, UBCO has several clear points of difference:

1. The 2x2 is the only vehicle of its type in production in the NZ and AU markets, competing directly against mainstream brands such as Polaris, Canam, Honda, Yamaha and John Deer, which manufacture combustion engine vehicles (2 and 4 wheel). People buy UBCO products because of the design, quietness, safety, utility, simplicity, and the increasing shift towards more sustainable products. There are currently no electric vehicles which compete in UBCO's market space. The 2x2 is an innovative product which uses a completely different drivetrain to any other manufacturer.
2. The US compliance that UBCO has been able to attain is an asset as it is a complex system that provides a 1-2 year moat for market entry and compliance with the regulatory system at a federal and state-based level.
3. The platform further differentiates UBCO over the medium and long term, creating a truly international brand and ecosystem.

Service & Support for Distribution & Dealers

Education is a vital part of creating a vibrant and effective distribution and dealer network. We have created the 'UBCO University' which covers sales and technical training for all levels of our network and also extends to end customers through instructive video clips. We have a high level of engagement with our network that we expect to grow over time through increases in our resource to acquire and serve our customers.

A cornerstone of our after sales support is UBCO’s Dealer Training Program and the UBCO Distributor & Dealer Portal. Dealer training in the form of workshops and online content capped with accreditation ensures all dealers are equipped to both sell and service our products. The Distributor & Dealer Portal is an online platform that connects UBCO with its distributors and dealers worldwide. It gives channel partners access to technical documentation, training videos and content, and market-relevant information on spare parts and warranty application processes among other things.

Marketing

Our mission statement is “To enable people to do inspiring things. Inspirational journeys, exploring our planet, saving our parks, working smarter and safer. We want a better world and we want our products to help you make a difference in it.” this forms the backbone of our marketing approach. We aim to touch and inspire our customers (end-users) at all four stages of the customer journey. We have broken down our marketing strategy into four parts:

1. Awareness & Profile: this is where a customer first learns about UBCO. This has been achieved through events, mainstream media coverage (organic PR), targeted PR, social media advertising and content marketing. UBCO has developed an 'Ambassador Program' that will bring in inspiring people that believe in our product and produce content through their occupations and will be a core part of our new global marketing site 'Silent Journeys'.

2. Experience & Education: getting to know us - this is aimed at getting a customer onto a 2x2 through local dealers and events. We augment this with a variety of educational content including fact sheets on specific parts of the vehicle and also application case studies and guides to make it easier to see how the vehicles are used in context.

3. Sales & Support: once someone has purchased a product we want to ensure they get effective after sales support and information. UBCO is implementing a unified global help desk which will enable timely support and tracking for all customers internationally.

4. Community & Knowledge Base: our goal is to create a community of 25,000 active users by 2025. This would be achieved through social media engagement and delivering an active 'knowledge base' for customers that is driven by our customer service system so we can actively engage with customers and enable customers to share stories, ideas and solutions about how the 2x2 is structured.

Operations

UBCO has developed a progressively more structured approach to development, manufacturing and compliance since the company’s formation in 2015. With the introduction of the first road legal vehicle came the need to build further structure and capability within our team in both New Zealand and the US.

Manufacturing

UBCO has driven a contract manufacturing model with all components manufactured by specialised companies (i.e. batteries, drives, frames) due to the hugely different plant equipment, skills, and experience involved. The supply chain is global with key parts coming from the United States, New Zealand, United Kingdom, Taiwan and China.

The primary region for our production is in China (Kunshan & Wuxi). These locations were selected due to high density of suppliers with experience in bike, motorcycle, and electric vehicle manufacture from drive control through to frame and battery manufacture.

UBCO has a tiered supply chain that involves all controlled assemblies, sub-assemblies and parts. UBCO develops and specifies all components from specialised manufacturers (Tier 2 Supplier). These are then supplied into a Whole of Vehicle Specification and assigned for assembly at a Master Assembler (Tier 1 Supplier).

The Tier 1 Supplier holds the compliance and certifications to enable the production of both on and off road motorbikes globally.

Tier 1 Supplier (Master Assembler):

• QC, ordering/inventory, assembly, compliance.

Tier 2 Supplier (Part Supplier):

• Drives/wheels manufacture and assembly;
• Control system manufacture;
• Battery manufacture and assembly;
• Frame manufacture and finishing;
• Power cabling and plugs;
• Other

Tier 1 Master Assembler

UBCO’s Master Assembler (Tier 1) is the largest electric motorcycle manufacturer in China (and potentially globally). The role of our Tier 1 assembler is to manage the Tier 2 supply chain, inbound quality control, assembly and final assembled product quality assurance.

The Master Assembler also plays a critical role in compliance and certification as they are required to hold external quality control certifications (ISO) and submit to certification reviews where necessary.

Our Master Assembler is accredited by the Chinese Vehicle Testing Centre to Issue VIN codes, and have the required accreditations to meet ECE (European) compliance requirements for production of on road vehicles (in the class UBCO requires).

They also have a significant testing facility that enables robust levels of performance analysis and testing covering: the lifecycle (accelerated), environmental (electronics), structural, electrical and control testing (physical).

Direct Supply Chain Structure

UBCO has direct relationships and contracts with its sub-tier supply chain, which provides the opportunity for more than one assembly plant and location. There may be downstream advantages to assembling the product in North America and Europe, whilst still getting the benefit of our supply chain.

As UBCO has developed many of the parts and assemblies, direct supply contracts provide clear agreement on warranties and obligations.

Quality Assurance

UBCO has established a QA Manual and Strategy that includes:

• Design and Development;
• Production and Manufacture;
• Product Delivery

UBCO has a documented QA process which is being progressively implemented by two senior staff with significant supply chain and quality management experience in China.

This includes:

• QC documentation and check-lists for major parts or assemblies
• Incoming parts QC
• Production manual and sub-assembly and assembly step QC – with QC checkpoints
• Recording of critical assembly serial numbers against VIN (Vehicle Identification Number) i.e drives, battery, ECU
• Final stage QC, manufacturer PDI (Pre- Delivery Inspection)
• Final shipment sign-off by UBCO representative

Compliance

UBCO has a broad compliance team which considers issue reporting and makes determinations in relation to safety and notifications to regulators (such as NHTSA). This cross functional team covers engineering, manufacturing, management and compliance.

Knowledge & IP

UBCO has an integrated IP program that incorporates both registered and un- registered IP across all subject matter:

1. Trademarks – for our global brands.
2. Design Patents/Registrations – appearance of products under PCT;
3. Utility Patents – function of products under PCT;
4. Trade Secret – where disclosure is not desirable.

Registered IP

These are collectively filed under international convention: Patent (PCT) and Trademark (Madrid Protocol) to provide the best priority date and maximum coverage internationally. This typically covers key markets, country of manufacture and corporate headquarters (New Zealand) to ensure freedom to operate.

Trade Secret

UBCO has developed and will continue to develop electronics (hardware and firmware), and software with parameters and algorithms to effectively control the system. Collectively these are subject to continuous improvement over time, and are encrypted through embedded systems resistant to third-party reverse engineering. We control access rights to both hardware (schematics) and firmware, for example the Electronic Control Unit (ECU), or brain is made in New Zealand under our direct control.

UBCO has developed subject matter knowledge and IP in the following key areas:

• Power Train & Systems – drives, controllers, batteries.
• Structure & Suspension – front and rear, frame structure & configuration.
• Communication & Control – ECU, telematics, software etc.
• Human Factors & User Interaction – all aspects related to or impacting on the user experience.
• Certification & Compliance – clear and definitive guidance on all elements of our system that are governed by international compliance for on road use.

Power Train System

The power train system incorporates drives, controllers, and batteries (anything that impacts on the power train).

Most manufacturers have pursued powertrains that require belt or chains to drive the rear wheel (in the case of 2-wheel vehicles) and transmissions, axles and drive shafts (in the case of 4-wheel vehicles). UBCO has developed an electric hub drive system specifically for the off road, utility market.

This system architecture is scalable from 2 to 4 and even 6 wheels. It provides a simple robust system with a range of advantages including a low center of gravity, individual control over a single wheel (allowing the wheels to communicate to each other), delivering benefits like traction control and more effective braking.

The Cerebro ECU provides a central communication hub whereby the vehicle can collect and respond to system information over time, developing a more sophisticated operation.

UBCO has retained some IP from registration and will be moving into a wider range of filings in the next year establishing a range of positions in the key areas of knowledge. These filings have been deliberately held back to ensure they are aligned with product development timelines.

Compliance

Often viewed as banal, the compliance side of UBCO also provides strong competitive defense. UBCO US has worked systematically through the US states to ensure federal and state based compliance provides a strong and natural hedge against companies wanting to emulate UBCO's products and services.

Market Potential

Total Addressable Market (TAM)

The Total Addressable Market (TAM) in units for each product class, was first established in each target market, through market research covering:

• Registered and un-registered 2-3 wheel motorised vehicles (Off-Road, Dual-Purpose, and On-Road);
• Unregistered 4-wheel ATVs/UTVs; and
• Portable Power equipment including generators.

The TAM includes all unit sales per annum of relevance to each product group (e.g. all global motorcycles sold (2x2), or all UTV/ ATVs sold (4x4)). From this the Serviceable Addressable Market (SAM) was determined by product for each region, based on existing and future:

• Product releases scheduled; and
• Markets entered.

The SAM is a small portion of the TAM, only including those unit sales per annum that an UBCO product group is capable of directly competing against.

As a result, an estimate of the Serviceable Obtainable Market (SOM) was made based on core product specifications and attributes, current growth and adoption rates, potential market opportunities and barriers, and chosen focus markets and products for market penetration.

The SOM is the actual unit sale volume per annum UBCO is capable of achieving at market demand saturation. This has been used to drive the actual number of units sold during the forecast period.

Market Potential

A summary of the Serviceable Obtainable Market per annum (SOM) is included below alongside an estimate of the consumer value of these markets at our forecast MSRP (this excludes software, spares parts and accessories).

Cost to Acquire & Serve

The total number of Sales and Customer Services employees dedicated to specific markets, located in-market, have been forecast as a measure of sales unit volume over time (split between Sales Management, Sales Representatives, Customer Services Management and Customer Services Representatives).

A minimum requirement for market entry is no less than 1 FTE in the roles of Sales Management, Customer Service Management and Customer Services Representative on the ground from 2021.

Where a distributor is appointed in- market, Sales Representatives are not included in the FTE allocation.

Head Office Sales and Service roles are not included above.

The in-market marketing budget is driven by the expected spend per unit required to sell a 2x2 in each market over time and build the brand. This spend is forecast 6 months before the sale of each unit and scales over time to acknowledge the increasing effort required to secure a growing market share following early adoption.

This is anticipated to tail off per unit beyond the 5-year forecast:

• An incremental cost of marketing per unit of other products sold is assumed for Portable Power (25% incremental) and 4x4 (50%), reflecting a requirement for additional spending to promote these items whilst leveraging off 2x2 marketing activity in-market;
• Where a distributor is appointed in- market, no specific marketing budget is attached. Marketing spend is instead covered by head office marketing support.

Growth Dynamics & Sales Forecast

The UEV platform is the largest generator of revenue in the business. UBCO has defined the key drivers of growth in the business as: the number of unit sales per dealer per month; and the reorder rate per retail dealer. The forecast model increases the rate of reorder relative to the maturity of the market and is based on evidence to date with in-market experience.

It is anticipated that model dealers may operate well above the averages over time, and that through dealer training, marketing and point of sale that we can drive strong improvements in reorder rates over time that may exceed those stated for forecast purposes.

There are a range of factors which are likely drive our adoption rates:

Internal Factors Influencing Growth

• Decrease in purchase price.
• Increase in total sales resource and expenditure.
• Increase in marketing resource and expenditure.
• Improvements in product efficacy and product market fit.
• Increase in energy density and range for our Power Systems.

External Factors Influencing Growth

• Increase in Fuel Costs.
• Decrease in cost per kWh in Power Systems.
• Growth in customer awareness and acceptance of Electric Vehicles.

Reaching the SOM will only occur when products are in the mature stage of their lifecycle. This is not likely to occur within the forecast period to March 2023. Volume growth throughout the forecast period however is generated from the SOM (in conjunction with product adoption curves specifically tailored to both product categories, and markets) to yield the unit sales growth over time.

Portable Power is a new product category which makes forecasting challenging. There will be some organic replacement of generators which are an established market but there are many applications where a generator would not be used due to noise and emissions. As such portable power sales are currently linked solely to vehicle sales. UBCO would expect to develop a clearer view of the forecast sales after market entry.

The forecast assumes the sale of Accessories occurs at the point of UEV sale with no repurchases. This is based off the average accessory purchase per new vehicle sold in the US in the product category. The 2x2 rates are lower than 4x4 rates based off these statistics.

The sale of Spare Parts are forecast to occur 9 months after the date of UEV sale for simplicity, because of several servicing intervals over the first 18 months. Spare Parts sales beyond the first 18 months of ownership have conservatively not been included in the forecast given inherent uncertainty of value over this period of UEV ownership.

Forecast

Whilst unit sales are forecast based on discrete product groups, the 2x2 and 4x4 product categories naturally overlap in the off-road vehicle space - as such there will be higher market potential for the 2x2 up to the point a 4x4 is established in each market as the 2x2 is already replacing ATV/ UTV units in-market.