Greetings and welcome to the Canoo Fourth Quarter 2020 and Full Year Earnings Release Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host Kamal Hamid, Vice President of Investor Relations. Thank you, you may begin.

Welcome to Canoo’s fourth quarter and full year 2020 earnings conference call. My name is Kamal Hamid, VP of Investor Relations at Canoo. With me today is Tony Aquila Canoo’s Executive Chairman and Renato Giger, Canoo’s Interim Chief Financial Officer and Principal Accounting Officer Fernando. Renato has worked with Tony as public company CFO for many years. He brings more than 30 years of leadership experience with a proven track record in complex global organizations where he was responsible for leading global teams, supporting multi-billion dollar operations. He will be invaluable to us as we build out our finance structure at Canoo. During this call we may make forward-looking statements based on current expectations. These are subject to a number of significant risks and uncertainties and our actual results may differ materially. For discussion of factors that could affect our future financial results in business, please refer to the disclosure in today's earnings release, our most recent forms 10-K and 10-Q and the reports that we may file on Form 8-K with the Securities and Exchange Commission. All our statements are made as of today, March 29, 2021, based on information that is currently available to us. Except as required by law we assume no obligation to update any such statements. For those of you who are new to the Canoo story, our mission is to bring EVs to everyone and we're led by our Executive Chairman, Tony Aquila. Tony is a visionary entrepreneur and public market leader who has consistently created significant value for his shareholders, who recognized the important software would play in a connected auto ecosystem decades before anyone else. He built several marquee businesses in both the public and private domains from the ground up, including Ensera and Solera. He brings deep experience in building high growth companies that are focused on technology, data and productivity. With that, I'll turn the call over to Tony.

Thank you, Kamal. I invested in Canoo because of the technology associated with the multi-purpose platform and the market opportunity it created enabling our mission to bring EVs to everyone. Since thinking on the role of the Executive Chairman, working with a team and leading industry consultants, we've done a deep dive to determine how to optimize our growth opportunities and maximize our shareholder value. First, we build out a world-class Board of Directors and are now building out our C-suite. Shortly after I joined, we brought on Pete Savagian as our Chief Technology Officer, Automotive. Pete has many years of experience in bringing EVs to market and has been very valuable add to our team. Today, we announced that Renato Giger, who I have worked with and known for many years, joined us as our Interim CFO. He along with Ramesh Murthy, our new Chief Accounting Officer and Hector Ruiz, our new VP of Global Strategy, Tax Counsel and Treasury will drive the necessary finance process, infrastructure and systems to transition us from a private company to a public company or as we say, move from little P to big P. To guide our brand and develop our commercialization and go-to market strategy we have brought in Mark Aikman as our Chief Marketing Officer, Automotive. Over the next four to six quarters, we will be focused on completing the build out of our executive team in a disciplined manner. Second, we have decided to shift our manufacturing into two phases. Phase 1, as previously announced we will use contract manufacturing to launch production of the MPP1 LV derivative. We will announce the selection of our partners shortly. Phase 2, we will move forward on our mega micro-factory where we will build our MPP1 and certain high volume derivatives. We are in deep discussions with a number of governors and their teams. And we will shortly down select to a final group of States. We have brought in, an experienced world-class team who have negotiated billions of dollars in incentives for high-tech companies, including automotive manufacturing. We issued an RFI, RFP focused on the areas of geography, labor force, educational systems, supporting infrastructure and their desire to build out an EV infrastructure in their States. And third, many investors have asked if we will be reporting on the industry impact of COVID-19, i.e., chips, battery, other shortages, collaboration effects and design impacts, et cetera. The answer is simply, yes, we will be reporting on this starting with our next quarterly report. Due to the expansion of our derivatives and the best return on capital it was decided by our board to deemphasize the originally stated contract engineering services line, this will further accelerate the creation of IP and the launch of our derivatives, which enhance our opportunity for the highest return on capital. Once this is complete, this will allow us to commercialize the three vehicles we have announced, our pickup truck, our multi-purpose delivery vehicle or MPDV1 and our lifestyle vehicle. All of which sit on our multi-purpose platform, which we call MPP1. I'm excited about these enhancements to our business model. And now let me tell you what attracted me to Canoo. First as an investor and now as an Executive Chairman and the market opportunity we see. Free from legacy thinking, we took an inside-out approach, designing from the bottom up to deliver the full potential of an electric vehicle. Our platform design gave us a cab forward vehicle that maximizes interior space and cargo capacity while reducing part count and simplifying manufacturing. Bifurcating, the mechanical propulsion elements of a vehicle from the cabin gave us a blank canvas to create functional productivity solutions customized to use cases. Industry-wide, today OEMs focus only on the first-owner sale, which represents only a small profit potential associated with the entire life cycle of a vehicle. Instead, we will focus on the 70% to 80% of profitability generated across the multiple-owner life cycle of a vehicle. We built in revenue touch-points for all owners throughout the vehicle life cycle, through the aftermarket and customization. No other OEM, whether ICE or EV has done or is doing that today. As a tech-first, industry-second company, our software and hardware are on connected platform that can capitalize on the full multi-owner lifecycle of a vehicle. Let me give you some context about our addressable market. Big picture, today there are about 1.5 billion light vehicles on the road globally. We believe that 80% of those will be replaced by EV over the next four to five car generations. Which means the market will add more than 1 billion new EV and efficient fuel cell technology driven vehicles over that time period. Driven by climate concerns, governments are legislating the phase-out of sales of ICE vehicles in the coming decades, 14 countries have set to phase-out the sale of new ICE vehicles from 2025 to 2050. As part of ESG, Fortune 500 and other companies around the world are increasingly laying out aggressive goals of carbon reduction, some all the way to being carbon neutral. Given that, within the U.S., the transportation sector contributes 28% of all greenhouse gases, switching to EVs is the quickest, most impactful way to achieve their carbon reduction goals. Providing a further tailwind, the Biden administration has announced plans to put the United States on a path to achieve net zero emissions by no later than 2050. Just as major innovations in the auto industry, such as mass production, safety updates and the quest for improved fuel economy represents major turning points. We believe that we are at a super pivot point today, expected growth and adoption in the EV market will drive billions of dollars in private and public investment with a multiplier of four to seven new jobs per every new EV job. And these jobs will carry higher than average salaries due to the advanced manufacturing nature of EVs. Beyond that there will be educational investments, workforce development and additional opportunities to the broader economy. Globally, EV sales are expected to grow at a 32% compound annual growth rate or CAGR in the next 10 years. By 2030, it is estimated that EVs will account for 25% of new car sales or 28 point million annual vehicle sales, bringing EVs to 8% of the global car park. We don't have to wait for EV technology to become economic for consumers, it already is and we are doing it, which is why our business model and our design is the EV for the trade and delivery-class professionals. Mobility working people, the people who rely on their vehicles for work, in fact it is these trades people who are putting on the mileage that makes the total cost of ownership of an electric vehicle favorable compared to an ICE vehicle. The average commercial vehicle travels 23,000 miles per year. According to our estimates after 9,000 miles of driving an EV breaks even compared to an ICE vehicle on a TCO basis, Total Cost of Ownership. Our MPDV1 provides over 35% TCO savings on a volume metric capacity basis over eight years when compared to a leading commercial ICE vehicle or similar cargo capacity, directly benefiting the return on capital to the mobility working people. There are 123 million commercial and mobility working people vehicles on the road today that would have economic benefit from switching to an EV. And of course, we are focused on fleet with our low TCO and high volume metric to our footprint. Given the imperative to reduce greenhouse gas emissions and the need to lower per mile cost of delivery in the, bring it to me market; it is clear that the EV market opportunity is huge. It is not surprising that OEMs EV players and others such as technology companies are positioning themselves to compete in the massive shift to EVs. In our view, many of the competitors have drawbacks that we do not. Because of the large capital investments, legacy automotive companies have already incurred, they will first focus on modifying existing ice platforms, which puts pressure on the bill of materials, or as we call it balm cost and the total cost of ownership. TCO leading to suboptimal design performance and user experience, and therefore leaving the long-term residual value of the vehicle at great risk and volatility where our competitors have experienced inefficiencies with a proliferation of models and platforms that often don't meet the market needs. We have a streamlined approach to meeting all use cases with our multi-purpose platform our MPP. So far we have announced three derivatives from our MPP; our pickup truck, our multi-purpose delivery vehicle, MPDV and our lifestyle vehicle. Our MPP approach lets us provide choice and optionality to our owners, allowing us to target use cases instead of segments. We designed and engineered a true native EV platform without legacy baggage paving the way for our expansive 20 million TAM and business model with multiple revenue pillars. This resulted in over 300 miles an estimated range; over 13% greater power density in our E-motor compared to leading competitors; 50% to 65% common parts across products; larger cargo space equaling nearly 30% greater cargo space then leading competitor commercial vehicles, which means we are not B2B. We're not B2C, but we are B-2-ALL setting us apart from any other OEM. Just like the pickup truck redefine the U.S. auto market. In fact, doubling in sales from 2010 to 2020, we will redefine the EV market with a single pickup truck that meets the needs of multiple use cases. With the turning radius of a Prius, the size of a Ford Ranger and a payload of a full-sized pickup, our vehicles cater to a variety of markets in use cases and are designed to economically benefit the driving enthusiast and the trade and delivery professionals. Our unique design and ability to satisfy specific use cases has resulted in significant customer interest and press coverage, highlighting our vehicles as the future of the delivery van and the Swiss Army Knife of Pickups. We take the modular concept to the next level and beyond the initial vehicle sale with revenue and value to customers across all generations of owners, through customization and up-fitting to meet the new owners used case. In this example, you can see how a delivery vehicle can be repurposed as a refrigerated truck, a pop-up retail shop, and then a food truck, as it goes from one owner to the next. This makes our vehicles feel new and customized to each new owner use case regardless of the vehicle age or mileage. Diving deeper into our strategy we recognize that our core value proposition is techno electro mechanical innovations. We will capitalize on our addressable market in three ways. One, our engineering IP enables our broader TAM; two, our software IP will fundamentally alter the value proposition across vehicle's life cycle; three, our aftermarket and customization strategy will drive revenue streams across generations of owners of the vehicle with accessories, ad-ons or upgrades. Going into our engineering IP further our MPP1 was designed to support as much as 75% of the most popular vehicles on the road today and provide improved manufacturability. We are excited that Canoo will be the first to market with many innovations including steer-by-wire, our proprietary leaf spring technology, our patented battery performance and thermal performance management and the most intelligent truck bed coupled with a deep focus on worker and driver ergonomics. We develop our software in-house, which allows us to rapidly develop and integrate new vehicle features and performance enhancements, security updates, and respond to issues on an individual vehicle or on a fleet-wide basis allowing us to future-proof our vehicles. We designed our electrical and network architecture to support the power and communication requirements necessary for advanced sensors and processing for autonomous driving, and these solutions are brought to market. All of our proprietary electronic control units support over the year updating and data collection via our hardware and software staff. As we continue to be validated both internally and externally by third parties to-date our test vehicles have accumulated almost 500,000 testing and validation miles providing us with important data for our gamma built. By targeting use cases and customers across all generations of owners we continue to build throughout the life cycle of the vehicle across multiple owners. For example, our recently revealed pickup could include a front gate, an expendable bed, step storage solutions and more, which could all be added with the second, third or fourth owner. We demonstrated the effectiveness of this approach by recently revealing two new models. In Q4, we announced our MPDV, our multi-purpose delivery vehicle. And then shortly after in Q1, we revealed our pickup truck with the lifestyle vehicle previously announced, this brings us to three derivatives on our MPP1. This ethos applies to all of our vehicles and will help us drive strong brand equity. With that I'll turn the call over to Renato. Renato?

Thank you, Tony. I'm very pleased to be here today on Canoo's first earnings call as a public company. Starting with fourth quarter 2020 results; research and development expense was $19 million in the fourth quarter of 2020 compared to $28.6 million in the prior year period, excluding $58.7 million of stock based compensation in the fourth quarter of 2020, research and development expense was $31.3 million. SG&A expense was $35.7 million in the fourth quarter of 2020 compared to $7.1 million in the prior year period; excluding $24.5 million of stock-based compensation in the first quarter of 2020 SG&A expense was $11.2 million. GAAP net loss was $12.3 million in the fourth quarter of 2020 compared to a GAAP net loss of $42.7 million in the prior year period. GAAP net loss in the fourth quarter of 2020 included a $115.4 million non-cash gain on the fair value change of earn-out shares, liability related to the periodic re-measurement of the fair value of our contingent earn-out shares liability. Fourth quarter 2020 adjusted EBITDA was minus $42.5 million compared to adjusted EBITDA of minus $35.3 million in the prior year period. Turning to our results of the full year 2020 revenue for the full year of 2020 was $2.6 million, up $2.6 million compared to the prior year. Research and development expense was $140.9 million compared to $137.4 million in the prior year, excluding $59.4 million and $0.9 million of stock based compensation in 2020 and 2019 respectively. Research and development expense was $83.5 million and $136.5 million respectively, SG&A expense was $51.6 million in the full year 2020 compared to $31.6 million in the prior year. Excluding $24.9 million and $1 million of stock-based compensation in 2020 and 2019 respectively, SG&A expense was $26.7 billion and $30.5 million respectively. GAAP net loss was $89.8 million in 2020 compared to a GAAP net loss of $182.4 million in the prior year period. GAAP net loss in 2020 included a $115.4 million non-cash gain on the fair value change of earn-out share liability related to the periodic re-measurement of the fair value of our contingent earn-out shares liability. 2020 adjusted EBITDA was minus $108.3 million compared to an adjusted EBITDA of minus $167.1 million in the prior year period. Turning to our balance sheet and cash flow; we ended the year with $702.4 million of cash on our balance sheet. Cash used in operations for the three months ended December 31, 2020 was $42.0 million compared to $43.7 million in the prior year period. Capital expenditures were $6.3 million for the fourth quarter of 2020, compared with $3.9 million in the prior year period. Cash used in operations for the year ended December 31, 2020 was $107.1 million compared to $171.5 million in the prior period. Capital expenditures for the year ended December 31, 2020 were $7.6 million compared with $22.1 million in the prior year. Now let me turn to our guidance for Q1 2021. We anticipate the four-week expenditures, approximately $45 million to $50 million for operating expenses, excluding depreciation and stock based compensation, and approximately $10 million to $12 million for capital expenditures. Let me turn you over now to Tony for his closing remarks. Tony?

Thank you Renato. To wrap it up I'd like to first start by thanking all of the great people at Canoo for their hard work and determination in building one of the most innovative vehicles on the market and coming to market today. We believe our multipurpose platform and vehicle derivative based on our use-case combined with our three-pronged revenue model will make us a top player in the global EV market. And now I'd like to open it up to questions.

Thank you. [Operator Instructions] Our first question comes from Craig Irwin with ROTH Capital Partners. Please state your question.

Good evening, and thanks for taking my questions. So it looks like there's been some fairly significant hiring and a bit of a ramp in R&D. This was always expected after you completed the SPAC IPO. Can you talk about sort of where you are in the process of hiring? How many more people when you aim to hire over the course of 2021? What is the – what is the potential growth in operating expenses look like because of that? And the 45 to 50 in OpEx is good, it's a very healthy number. Do you have maybe an updated stock comp number to use with that?

Yes. Hi, Craig, good morning. So, from a hiring perspective, I'll answer that. Renato – asking do the stock comp piece. But from a hiring perspective, we're targeting about another 100 FTEs that we'll be adding in as we move through the gamma phase. Of course, it is a talent war out there; we've actually done pretty well. All things considering that it's been a hard market so to speak and we'll continue to use aggressive tactics to find the right people for – to meet our plan.

Craig, this is Renato. Nice to meet you. When it comes to companies compensation we are not forecasting that because it depends on the share price going up or down, and therefore we are not forecasting it number one, number two, because it has no cash impact. It's not that relevant as of today.

What I would add to that, Craig is we are targeting 75th percentile and above to ensure we're hiring the best people again, that's what I refer to in the aggressive tactics.

Okay. The second question there – there's a little bit of a contradiction in your prepared remarks. So Tony, you talked about how engineering IP broadens your TAM, but then you announced that you're deemphasizing your engineering services. Can you help us resolve that and maybe give us a little bit more color about why you would deemphasize engineering, given that the original story was – it would subsidize the development and broaden the partner opportunity with potentially multiple hats on their license.

Yes. So look, I would say that from the comments perspective it was a contradiction, it hasn't been a contradiction from my statement. Look, as I said in the new marks we looked into this, it kind of goes to your first question too with the talent war and everything just the $25 million, it would yield us. We at the board really feel like the best thing to do is to accelerate our derivatives and focus our talent on creating IP for the company. You also have a lot of IP leakage when you do this work. And from my perspective, if I had been more involved earlier certainly, I certainly once I started – I invested and then I took the chairmanship, we started the analysis. I had concerns about this. If you study all OEMs, you can find a partnership or something like that if it makes sense. And we'll continue to look for things, but to be a contract engineering house is just really not going to drive the best shareholder value.

Okay. And then, this is a tough question, but all the institutions are going to ask this question tomorrow, right? So first Alex Marcinkowski is gone now Paul Balciunas. These are the two gentlemen that sold the pipe. A lot of people met with them and Ulrich for your de-SPAC process. That's a fairly heavy turnover and we didn't have Ulrich on the call today, which appears like I'm missing. Can you maybe talk about the high turnover and what's going on here; and is Ulrich still Chief Executive Officer?

Yes. So look as we've kind of been navigating through going public. We're obviously bringing in people with extreme public company experience. We're making the call today from Dallas, Texas; not in California, due to the California still in a bit of a lockdown, and Texas being wide open. So yes Ulrich is still currently the CEO of the company, and as far as with respect to your comment about turnover, its true there's been some turnover in these positions, but we've been bringing in people that one and they have worked together as I mentioned in my comments, and this will stabilize. I think a lot of SPACs and a lot of companies as they go through this migration will be bringing in people with experience in the public markets. So, I just think we're a bit ahead of it and we'll stay ahead of it, and as we navigate this step-by-step quarter-by-quarter.

Last question, if I may. You're obviously deemphasizing engineering and engineering services. So that seems to imply that the original SPAC model is no longer guidance going forward. Is that accurate?

We'll be giving – we're not going to give – at this point that doesn't make sense to give guidance until we complete the work that we have started. And with all that's gone on in the SPAC world, in the pre-revenue side, we want to be very conservative. If you look back at the history of the team that is now more and more coming into play, they've been – they never missed consensus. And so doing this at a high public company standard, I think is important for all SPACs, and certainly we're going to do our best to lead the way here. And so we will be step-by-step building this and we will be delivering information as it is. It is known and contracted, not based on light rev – reservation models. I think that's dangerous. I think it could be somewhat misleading. And so typical of any leadership change at different standard comes in and will guide you through that. Kamal, we'll be following up with you on a regular basis. Certainly do acknowledge your point; Craig that you got so to speak, as you mentioned showed a different model, but this model is better from a return on capital basis. And I think as you work through it, you'll like it, especially the areas and the margins of the areas we plan to operate under. So let's kind of table that and discuss through it.

So I will acknowledge that these are significant surprises on the call today, and that's not ideal after a SPAC IPO process. So, I just wanted to underline that? Thank you.

Totally understand your understand your perspective; obviously I wasn't here when they did the original model, but certainly wanted to get ahead of this and explain to you how this really is going to work and how to build a profitable company, which we've done in the past. And we intend to do here, but hey, we understand the situation it puts you in and we work closely to rectify that. So you can understand very clearly where we're going. And I think once you do, you will understand why we made these changes.

Thank you. Good luck.

Our next question comes from Jaime Perez with RF Lafferty & Company. Please state your question.

Hey everybody. How are you doing? Thanks for taking my call. A quick question on these, you mentioned you have several prototypes at the end of any feedback or data and all these prototypes with fleet customers?

I'm sorry. Jamie, can you repeat that please it broke up a little bit on this end?

Yes, sure. So yes, you on the press release you mentioned you have about 13 drivable prototypes; these prototypes with fleet customers, and could you tell us how far the – along way these prototypes are when we could see maybe a beta model out there?

Yes. So obviously we've released the video footage for the truck and the MPDV. So we're – as soon as the world opens up, we'll have a proper Analyst Day and we will bring you guys in, so you can see it and ride in the vehicles, but we have 500,000 tested miles coming through. So we have these vehicles in all kinds of different terrain conditions typical of what you do in testing. So look forward to, and by the way when we do have the prototypes in Texas, which we currently do right now due to some meetings we had; we're happy to entertain if you'd like to come down and see them.

Yes. That would be great. Now, these prototypes have you and especially in the pickup trucks, have you tested it as far as weight capacity, towing capacity, I mean, just trying to get out on how much it could compete with something like the F-150?

Yes. So look the size of the vehicle, the pickup truck we've got it kind of focused on around the same 2,000 pounds payload capacity range, 1,800 to 2,000 pounds. And that's kind of aerodynamically somewhere in the 200 plus mile range on a 600 horsepower, 500 pounds of torque set up drive, train, and, again when you come down and happy to show you the vehicle in more detail and we'll continue to engineer that, we'd like to get that – those numbers up a little bit. But right now that's everything what we can and far as towing capacity goes we're currently looking at about 2,500 pounds, depending on again, depending on range effect. So you can get up a little higher depending on the range.

And my follow-up question; as far as outsourcing a contract manufacturer, have you – how far have we progressive, have you identified any one particular what's the scope of the project and do you need to lay any capital upfront for like a JV, maybe give us a little bit detail on the outsourcing?

We have a couple of finalists right now where we're in that phase, obviously with the leadership change we wanted to look into those into very detail. We brought in some of the new hires that were brought in or manufacturing experts. And we launched a two-pronged approach, contract manufacturing, as well as with especially with the tailwinds from the Biden administration. There is a lot of subsidies in creating a state deal. So we'll be announcing, and we'll be looking to wrap that up in the coming weeks to months. And we’ll announce those people are. With respect to capital base, the capital range is a little bit different because of the geography between the finalists. And of course, the new model that will introduce the mega micro-factory approach is designed so that since we do have our own motors, since we do have a lot of our own design and componentry, as we internationalize the platform, a lot of us have a lot of experience in internationalization, the micro element is you can take your engine component part of the factory and you can plop it somewhere else and make your engine. So kind of similar best-in-class activities.

All right. What's the rationale going from an outsource manufacturer to taking and doing the manufacturer in your own plant?

Yes, so good question. If you think about the way to best internationalize your platform and to address low volume units on a top hat basis, because the MPP platform is common across the vehicles, we've announced. So, that component we want to manufacture long-term on our own. In the short term, we have to deal with demand while we get that part of the factory up and running once we announce the state. In addition to that on the geographic side, it would be very wise without tilting too much of our hand at this time is to think about if you have a contract manufacturer similar to best-in-class again you can use that for your low volume and your geographic expansion if it's located in the right place. So obviously in North America, we want to produce here, deliver here and all of that. But in the interim, we want to be able to have the ability to also, because we are getting a lot of demand opportunities coming in from Europe and beyond, so we need to have something so that we can get through that pretty quickly. And then you don't have any real leakage of your capital cost.

No, as far as demand U.S. versus Europe, any particular market open towards more the consumer side or the fleet customer?

So Europe shows a lot of strength, more strength and adoption speed-wise on the multipurpose delivery vehicle, especially because of our turning radius and the size of it. It can go on Roman roads, it can go on American roads, it can go on Latin American roads, which is a very important part of the equation. In addition to that, those countries have already made their phase out statements for ICEV vehicles to EV. So that's in part driving this two-pronged approach. I think a lot of people are going to get themselves into a bit of a quandary if they don't have the ability to do a hybrid, especially for those of us that are bringing vehicles new to the market. This will ensure delivery schedule. We may have some costs in shipping, but we won't have any long-term leakage of our CapEx and these other things. So think of it as being somewhere in the European theater.

All right. That's all the questions I have. I'll pass it along. Thanks.

Thank you.

Our next question comes from John Murphy with Bank of America. Please state your question.

Good afternoon. Just wanted to ask a follow-on to that contract manufacturing line of questioning, I mean, are you looking at somebody, a company that is really going to be just an assembler or, how much help, I mean, you're pretty far along in the process on the platform itself, but I mean, somebody would help on design and engineering in addition to being a contract manufacturer, a lot of the contract manufacturers have a lot of capability sort of a Magna or Magna Steyr, if you will. Just curious how integrated you'll get with them.

Yes look, I think, from – to your point about, on an MPP or as the market talks about it as a skateboard, we're pretty much one of the most advanced. At least we can – so far as we can see. And, we've already crash tested; we've done a lot of stuff. We've released the videos of driving the chassis out in the desert. So, from our perspective, most likely one of the components of that would be, some kind of partnership with them to manufacturer that part while we're getting our own factory up and running. In addition to that, we have our own engines, we have our – a lot of the components we're targeting around 80% of the components to be to be ours and located in the U.S. or North America. So we're not trying to be an assembler of parts, we're creating IP, which goes to the reason why the return on capital wasn't as good to have our engineers doing contract engineering work for another brand versus creating our own IP, which we think, gives us a very tangible asset that we have today that is very leverageable as we build out our delivery strategy state-by-state, country-by-country.

So maybe that's more succinctly, this is a contract manufacturer, an interim contract manufacturer that you may use for niche products over time, but you yourself want to be the company, the ultimate manufacturer over time. And this is a stepping stone to getting there. Is that a fair way of characterizing it?

I think to be – it's not an – it's not a one-dimensional thing on this, it's multi-dimensional to your. So one of those dimensions is, you obviously want to use your contract manufacturers just like best-in-class ones do on your lower volume units and/or your specialty units. But in addition to that, we are adding another dimension to it, which is to help with our geographic expansion, because remember the three derivatives are on the same MPP.

Got it. Okay. And then a second question. I mean, when you look at the competitive landscape a tremendous amount of money is obviously made in the truck business and certainly a lot of that is coming on the commercial side. So I'm just curious when you look at the competitive response you're getting from the likes of companies like GM and Ford would have products that would be theoretically, you can certainly debate this somewhat similar. I mean, I'll ask sort of GM, bright drop, I mean there are other opportunity or other sort of substitutes that are starting to bubble up here that are different than the way they are traditionally operated. So what do you think about the competitive response? What you're going to be looking at for some of the legacy folks that have relationships from the customers you're going to be going after?

I think a lot of these guys are going to be doing what I'll call electromodding. They're going to be putting battery systems in ICE platforms. That is suboptimal from a TCO basis. As you probably know our background were the aftermarket guys, every nut bolt from every car for the last 50 years and its performance all the way to the wrecking yard. And when you start to put different weight distributions and power sources, you just fatigue frames. And so this is a pure design, as we showed you again in the video, I'd love to host you as well, come down and see it, touch it and feel it and drive it, you will see that this is a very uniquely designed platform. And so I think on a pure basis, we've got a junk, but competition is here. And the ratio in 2010 was kind of 10 vehicles to every truck, 10 cars to every truck it's now 5:1. And our design is very different, when you get a tight turning radius of a small compact and you can do it on the size of a Ford Ranger that can stretch the bed to an F-150 if you will to just sustain with that particular line that's very different. And on top of that, you have a multifunctional intelligent bed system, which for those – this is a design that is really designed for the people that use their vehicles. And EV will give them a great return on capital. And so look – I mean there's no doubt, there's going to be a competition and a fight out there, but it's also the area of the industry where all the margin is and so we're trying to be smart about this, leveraging everything we have and time will tell where we place – where we intend to place, just like we have in our previous lives.

And then just last real quick, I mean you've tweaked the business model a little bit. But I mean, just curious on the sort of retail or to the consumer side, how you're thinking about that going forward. Is there just too much opportunity on the commercial side and you're kind of putting that sort of back burner or is this subscription model still in play, because I know that was part of the story before. Is that changing in any way or is that sort of later dated or is it just the same as before?

So great question John, so look, you know the industry well. If you think about a membership model, when I came in and took my role, and we spent a lot of money analyzing the rate that this will have on the balance sheet. And I think to the point that Craig was talking about the changes, I mean we wanted to bring in people that have a lot of experience on residual value, balance sheet management and how to build a company at scale. So you can only have a certain percentage of your business on membership otherwise you've got a big cache that starts to develop on you, as you can probably imagine. So we'll be doing that on an appropriate basis. Had I been here from day one? I can tell you, I wouldn't change anything on that MPP it has amazing design, which is why I compliment the engineering team incredible. Would I have changed the sequence of top hats and use cases I would have, went after based on my experience without a doubt. As you can see the modifications we’re doing. To your point when you really think about it on a financial burden basis on the balance sheet, yes there's probably 80% change but it's to that mathematical positive. As far as the sequence of changing the things we're really on the top hat side, which is less, right. You're in the 20% to 40% range. So I liked the model, I believe in the model. I know the model, it holds up mathematically and we'll walk you through this. And again, I apologize to anybody, as a leader, you always own the past, before the present or the future and so I take everyone's comments in all the three categories.

I'm sorry to keep calling, but I mean this is definitely – so then you're saying a tilt away from the consumer much more commercial and away from something with sort of more balance sheet heavy to something that will be more on the fleets owning the vehicles. So it just seems like ROI goes off and there's a little bit less risk. Is that a fair?

We're definitely taking the data that the risk factors down. But what I would tell you is, we are concentrating on commercial and if you will, kind of the mobility professional user, that [indiscernible] bring EV market is developing, which is kind of a hybrid of consumer and commercial and so, that's where we're focusing our efforts on first. And if you really study at the deepest value of where the LV was, it was really going after the people moving side of the world, COVID just hit it, punched it in the nose a bit and people don't want to be that close to each other. So we've optimized it, but yes, absolutely from a financial perspective this has a much more positive trend. It's just math.

Got it. That's incredibly helpful, thank you.

Our next question comes from [indiscernible] with Taglich Brothers. Please state your question.

Hi guys. Thank you for taking my questions. Some of them were answered, but I will shoot two new ones. I will go back to the product validation. And I appreciate that you have 13 drivable prototypes, 32 better properties, but they were the same number in August of last year. So no new drivable cars have been built in the fourth quarter, you did some crash test, but the product validation phase is so important for us. So if you can explain the pickup truck, for example, I assume that was built in Q4, but the prototypes number did not increase, so now can you? Yes, thank you.

Yes. Good question. So look, we've increased our driving miles obviously in testing and we've tested more seasonality and we'll continue to do the testing. COVID has put a little bit of pressure on that, which is why we said starting next quarter we'll report exactly where the COVID impacts were. And then with respect to crash testing, for example has gone up. We're reusing the MPP and we're then putting a modified or regenerated top hat on it, so we can crash test it again. We're recycling some of the MPP until we get some of the low volume manufacturing and tooling in place, so we can accelerate the number of chassis, but that's our current constraint right now. It's chassis driven.

So the pickup truck, was it really drivable? You said it it's in the parking lot, we can drive it if wasn't COVID. But the number of prototypes did not increase. So it is really something that we could try?

So yes, it is on our MPP. The pickup truck is on top of our MPP. So we just took another chassis and we rejuvenated it and we put it back to work. That's kind of how it's done here. That's how you get a lot of mileage. If you will, and use cases, it's like a vehicle that gets wrecked, it gets repaired. It's put back on the line. That makes sense?

That's great. That's a good test for your second, third, fourth-owner philosophy.

That is correct. That is part of the way we're testing it. We want it to be a reliable for and so you have a good view on your total cost of ownership, as well as your insurance costs.

Great. Thank you. And my second question is, you introduced first the lifestyle vehicle, then the delivery truck, then the pickup truck. Has the timeline of launching vehicles changed due to where the market is going, you said you focus more on commercial, so should we still expect the lifestyle to launch first or has the timeline changed? Thank you.

Yes. We're still going to launch the lifestyle vehicle. We'll bring it with a few more configuration upgrades which we're working through now. So it can meet the needs of some other customers. But yes, we're going to stay on with the LV first and then the MPDV and then the pickup truck.

Great. Thank you guys.

Thank you.

Our next question comes from Joseph Spak with RBC Capital Markets. Please state your question.

Thanks everyone. Thanks so much. Lots of adjusts, I guess. I just want to clarify a couple of things. First on, back to the subscription model just to be clear, is that still a possibility just at a later point in time? Or is that something you think you've completely abandoned?

No, it's a ratio issue Joe. We're going to focus on something sub-20% of our sales will be in category. Otherwise we got to have to raise a lot more capital as you know, because you're going to have to see this on your books and then you're going to have all this accounting, mark-to-market. And I just think it was like any innovative idea and you can see the industry is struggling with the whole membership model as it is. So there's no reason for it to be over-weighted. It would be appropriately rated in our market. In addition to that, you get into the areas of, it doesn't positively impact incentives, there's a whole bunch of factors tax, accelerated tax depreciation for the class. So we're looking at it in a much more detailed and return on capital perspective, not only for us but for the owners of the vehicle and who are those in the membership. So membership is not going away. It's just being appropriately managed on our balance sheet. That makes sense?

Yes. Okay. So then with respect to the lifestyle vehicle and you mentioned a couple of times, mobility working people I'm curious, have you had conversations with either the TNCs directly or maybe fleet leasing companies, because it does seem like a vehicle that obviously lends itself towards the TNCs pretty well. And obviously you mentioned some of the electric benefits, so curious if you could mention any plans there, any conversations you've had? And obviously if you're sort of selling it either directly or to a fleet lease or that absorbs the subscription ratio problem as well?

Yes. They're not interested in subscription, right. It just doesn't work for their model. What they are interested in some kind of a variable lease mechanism that works for their balance sheet as well. But yes, we are moving into the commercialization phase. We have international sales coming up online. So we're looking at large entities that have already made the decision to make this migration over the next two car generations and that's the pipeline activity we're focused on. And so the answer to your is yes. And we see a lot of opportunity, inbound calls as of today, as well as outbound.

Okay. Well, last one for me, just going back to the decision to deemphasize engineering with the Hyundai arrangement the original one, which I'm assuming that that's now off the table. But if you go back to that release, did say Hyundai gains access to technology, you mentioned IP leakage is one of the potential problems with that arrangement. Can you just talk about, like how do you unwind that sort of memorandum of understanding what work was done? Do you think there was any IP leakage obviously Hyundai is coming out with their own electric vehicle platforms as well?

I think what happened is pretty kind of case in point. So I think the company, just like any adolescent companies, it's learning its way and all of us go through it. But it factored in contract manufacturing based on the labor of engineers, not based on the value of IP, which would have changed the value of that contract significantly. And look, we have experience in this area and we're very focused on if we do work, one, we can protect our IP and we can get the residual value of that in addition to. So it's kind of caused us to say, hey, let's put that on hold. We have so much demand for our three derivatives. Let's get all that work done. And then let's, look at if there is partnerships, partnerships can work in this industry. But contract manufacturing work is as you know is not the best business line to be in. And so was there some leakage, well, I'll leave it to you to make that decision, but obviously I'm not a big fan of doing that type of business.

Okay. Thanks very much.

Thank you, Joe.

Our next question comes from [indiscernible] with Kronos Capital[ph]. Please state your question.

Hi last year during the course of the year, you stated a couple of times that you had discussion with some OEMs and possibly the contract manufacturers. You said that there are going to be some announcements by the end of Q4. I'm just wondering what happened that, that changed all that?

Right, so you're again, owning the past as much as the present and the future. Look, I can only speak to what I know about this. I think that they were – they were focused on maybe a little more aggressive than I would be in their statements. I think the more maturity of this team would not be that presumptuous. We only announced what is contracted. But yes, I think they had the opportunities but they weren't at our standard of representation to the public market. So that's all I can really say about that, because I don't know much more. But it also didn't really matter that much, because obviously I wanted to go in a different direction based on the study we did and with the boards help, and observations also kind of solidified that. So I think we'll certainly work our way past this commentary. And then with respect to contract manufacturing, again we wouldn't make an announcement. Again, this comes back to having an experienced public company team. You got to be careful with the statements you make. So again, I think it was a little premature, although the reset caused us to look at all the negotiations and we're actually in a much better place. So all things considering they're trending in the right direction.

Steve, if you've got a follow up question, that's fine but I think we'll get-off after that.

Okay. With respect to the coming six months or a year what can you say are your major milestones that you're looking at?

Yes. So look we'll continue to progress our gamma for the LV be really focused on how we will report reservations versus orders. In addition to that, locking in our geographic and contract manufacturing partner for the long-term, it won't be a short-term decision so we can get the return on capital. It'll fit into our long-term strategy. In addition to that, announcing who we partner with at the state level to build and release. In addition to that, we'll start in Q2 taking defined reservations that again will be in alignment with the way we report. And so you have absolute clarity into these reservations and orders. So those are going to be just a few of the things that I would say, would be very important if I was looking at it from your side.

Okay. Thank you very much. I just have one comment, not a question. Your investor relations team, they do not return emails. I don't know if any other gentleman on the call had any success with that, but I would suggest that your Investor Relations team get up to gear and answer the emails and be able to more forthcoming.

Look, it's a great comment. And he's been a little overwhelmed with people asking for responses and we are building out the team, step-by-step. We just brought in a few more people. So I think this quarter we'll do a much better job, but certainly feel free to call me anytime directly. If you're not getting any responses in a timely manner, that's acceptable to you.

Okay, very well. Thank you so much.

Thank you.

Thanks everybody. Thanks so much for joining us today. And reach out if you have any follow-up questions or come on down to Texas, if you'd like to visit and see the products. Thank you.

And in California when we are open back up.

Thank you. This concludes today's conference. All participants may disconnect. Have a good evening.